A survey of British Institute of Innkeeping (BII) members, has highlighted the fragility of pubs in every community across the UK, as they face huge inflationary headwinds, disproportionate costs for their businesses, severe staff shortages and the impact of the cost-of-living crisis on consumers.
Our nations’ pubs represent a unique opportunity, bringing significant economic contribution to the Treasury, supporting jobs and careers for people of all ages, whilst providing an essential and accessible hub at the heart of every community.
Impact on profitability:
The survey revealed that over 75% of members are down on the revenues they saw in 2019, with 84% of those being down by more than 10%. 28% are down by more than 30% vs 2019.
In addition, 86% have reported that their profits are down vs the same period in 2019 and almost half of those were seeing profits down by more than 30%.
Their profits are being eaten away by the exceptional cost inflation they are facing across the board, with 66% saying their costs have increased more than 10%, 43% saying their costs have increased by more than 20% and 1 in 10 experiencing inflation of over 40% in the last 6 months.
Consumer confidence has also taken a massive hit, with changes in behaviour since the pandemic and reduced disposable income as consumers also face hikes in the cost of living, which all further impact on the profitability of local pubs.
Staffing crisis:
75% of pubs currently have vacancies in their businesses that they are struggling to fill. Of these, over half have more than 10% of their roles currently vacant and 1 in 8 have more than 20% vacancies.
The impact of this lack of staff means that 1 in 2 pubs are having to reduce their trading hours, and 1 in 4 are having to close their doors for 1 or more of their usual trading days, losing valuable revenue opportunities. All this, when they should be trading fully to make the most of the summer, ahead of the quieter autumn and winter periods.
Financial sustainability:
A worrying 30% of respondents said they currently have no cash reserves in their business, with a further 50% only having between 1 – 3 months’ worth of cash reserves.
Furthermore, 70% have debts in their business, with over a third of those carrying debts of up to £30k, 40% having debts of up to £50k and a huge 1 in 4 pubs having debts of between £50k and over £100k. Without support, business failure will result in much of the repayment of Government backed debt will be lost.
When it comes to investing in the future of their businesses, nearly 90% are not currently seeking any additional finance and of those who were, 2/3 have not been successful in securing that finance through any route. 1 in 4 have used their own savings to invest but only 5% have been successful in securing finance through their existing bank and only 16% able to access funds through a new or additional bank.
Future trading:
15% say that their business is no longer viable, and they will be leaving or selling their business shortly. Of these, over 1/3 have been in the trade for 10-20 years and over ¼ have been running pubs for more than 20 years, losing the wealth of knowledge, experience and commitment to the local community of these licensees and their families.
Priorities for Government Support:
The following are the key areas for support that BII members have identified
- VAT reduction for hospitality businesses
- Energy price rise cap for pubs
- Full cancellation of business rates for 23/24
- Draught beer and cider duty cut for pubs
Many BII members operating drink led venues, commented that a VAT cut had marginal benefit for their businesses and would want to see any cut extended to alcohol to ensure a level playing field with supermarkets and other retailers.
Steve Alton, CEO of the BII commented: “Pubs are a vital and vibrant part of our unique heritage and national identity. They provide safe spaces for all, offering a diverse range of opportunities for people to come together; from breakfasts to business meetings, celebrations to community connections and everything in between – they are an essential and intrinsic part of British life.
“Hospitality is not a small subsection of our economy – pubs are everywhere in the UK, providing the opportunity for economic and social value in every village, town and city and can be the key to growth and unlocking the levelling up agenda across the nation.
“They also offer a vast range of employment and career opportunities to people from a wide range of backgrounds, education and demographics.
“With so many shops disappearing at a rapid rate from our high streets, they are essential for the regeneration of our communities and towns, but are currently under threat from the exceptionally tough trading conditions that they are battling.
“Government support is essential to enable us to create and develop economic, employment and social value growth in every community. There is no need for failure with the right support in place, but if Government do not step forward, they will have missed the opportunity to tackle so many of the issues we are facing as a nation, head on.
“Pubs have weathered the storm of Covid, by repurposing and diversifying their offer, creating safe, environments in every community, welcoming customers and teams from all walks of life and caring for those communities in the darkest of times.
“Without support from Government across the 4 key areas our members have identified, we will undo all of the good they do in bringing people together. Without support we will lose the opportunity for growth and regeneration, we will lose pubs from the heart of their communities, and we will lose something very special in our nations’ unique heritage and culture.
“They now need, and deserve, the support that can enable them to survive and thrive once more.”