UK Alcohol Tax Increases Damaging Government Revenues: Report

by Amanda Banks, Tax-News.com, London

23 July 2009

A record 52 pubs a week are now closing in Britain, leading to the loss of 24,000 jobs in the last year, according to new figures compiled by CGA Strategy, released on June 22 by the British Beer & Pub Association (BBPA).

The figures for the first six months of 2009 show the rate of pub closure has increased by a third, up from 39 pubs a week in the last six months of 2008. Over the last 12 months, 2,377 pubs have closed, costing 24,000 jobs. In the last 3 years a total of 5,134 pubs have closed. There are now 53,466 pubs in Britain, down from 58,600 in the year before the Licensing Act came into force.

The industry is suffering rising costs related to regulation, and rising taxation on alcohol, particularly beer, which is due to rise at least 2% further in March 2010 depending on inflation.

“The recession is proving extremely tough for Britain’s pubs,” commented BBPA chief executive David Long. “However, those economic pressures have been made much worse by a government that continues to pile on tax and regulatory burdens. The last two budgets have seen a 20% increase in beer tax, which alone has added more than GBP600m to the industry’s tax bill. In addition, the government continue to press ahead with the Mandatory Code of Practice, which is set to increase red tape and increase administrative costs by GBP30m.”

“While every other sector seems to receive a sympathetic ear and taxpayer funding to tide them through the downturn, all we are getting is a deaf ear and a higher tax bill.”

The BBPA has asked the government to reconsider its plan, warning that further increases in tax will only reduce revenues as pubs close their doors. The industry’s total tax bill now stands at GBP6.1bn a year. Every pub contributes GBP107,000 in tax a year – equatable to 30% of turnover. Pub closures over the last year have therefore cost the Government more than GBP254 million in lost taxes – a loss that is increasing by more than GBP5.5m a week. Sector job losses are also costing the government an additional GBP1.53m a week in job seekers allowance.

“Every week, a further 461 jobs are lost in our sector.” said Dr Long, adding: “The government needs to listen to the pub sector in the same way it listens to other sectors suffering this level of job losses. Not special treatment, just equitable treatment.

“As a first step, the government should commit to not increasing the cost and complexity of running a pub, by stepping back from any more tax or red-tape increases.”

Community pubs are proving the most vulnerable in the current economic downturn. Branded pubs and café style bars are actually opening at a rate of 2 a week. However community pubs are closing at the rate of 40 a week and nine traditional town circuit bars are shutting a week – five pubs a week are closing in other categories. Food seems key to some sustainability. Pubs that focus mostly on selling drink are shutting up shop at the rate of 51 a week, while those that focus more on food are closing at one a week.

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