Andy Burnham’s pledge to cut business rates for pubs, clubs and music venues is expected to save each venue more than £1,000 next year, in a move carrying a £100m price tag.
The announcement was broadly welcomed by trade bodies and pub groups, yet investors responded with notable scepticism when markets opened following the news.
Shares in Marston’s, which operates more than 1,300 pubs across the country, shed more than five per cent of their value on Thursday following the announcement.
Young’s dropped more than four per cent, while JD Wetherspoon and Fuller’s, which runs 185 pubs in the UK, opened three and one per cent lower respectively.
The muted market reaction exposed just how significant the headwinds facing the UK pub sector truly are, well beyond the relief any business rates adjustment could provide.
The £1,000-per-pub saving amounts to roughly £25 per week which, while welcome, “hardly moves the needle,” said Alex Pugh, an analyst at Freetrade.
“Any rate savings will be easily dwarfed by labour costs, higher employer NI contributions, sticky input prices, and energy bills well above historical norms,” Pugh warned.
“Combined with belt-tightening consumers who are cutting back on discretionary nights out, business rate tweaks alone aren’t enough to re-rate the sector,” he added.
Applying government estimates to Wetherspoon’s 793 managed pubs, the chain would save £872,300 in business rates next year, leaving it with an estimated £41m business rates bill, alongside £167m in alcohol duty, £411m in VAT and £154m in employment taxes.
Mitchells and Butlers paid £79m in business rates last year, meaning a £1,100 cut across each of its 1,145 pubs would still leave it with a more than £77m bill, and its shares fell five per cent on Thursday after it posted flat sales and warned of “challenging weather conditions.”
Wetherspoon also issued a sombre notice to investors on Wednesday, warning on profit for the fourth time this year, underscoring the broader difficulties facing the sector.
Russ Mould, investment director at AJ Bell, said the tax cut would not change pubs’ “long-term competitive position, as they wrestle with the challenge posed by promotional prices at the big supermarkets, or what is still soggy consumer confidence.”
Wetherspoon chairman Tim Martin has long campaigned for the government to rebalance a tax system he claims allows supermarkets to sell alcohol far more cheaply than pubs, and says pubs have lost 50 per cent of their trade to grocers in the last 25 years.
Defending the policy, Burnham insisted it was a “first step” in his bid to renew local communities, saying pubs “need to know that the cavalry is coming.”
The announcement also carries political undertones, as Burnham works to rehabilitate Labour’s image among pub managers following Rachel Reeves’ troubled business rates reform earlier in her tenure as Chancellor.
At the Budget, Reeves announced a 5p cut to hospitality business rates, but when calculations were published, pubs and restaurants found their tax bills would rise by as much as 224 per cent.
Some pub bosses called the changes “shit” and claimed they were “lied to,” with Labour MPs reportedly banned from certain pubs and opposition parties quickly announcing rival policies to capitalise on voter anger.
Reeves eventually announced a £300m package to allow pubs to receive a 15 per cent discount on the tax, but the damage to Labour’s relationship with the sector had already been done.
The Institute for Fiscal Studies’ Helen Miller warned that the latest changes were “not a welcome development,” noting that because business rates fall on landowners rather than business owners, rents may simply rise to offset any savings, leaving pub operators no better off.
Pub landlords are already pushing for more, with Martin ramping up pressure on Burnham to commit to cutting VAT on hospitality businesses from 20 to 10 per cent, a measure Burnham has previously indicated he would “argue” for.