As part of the Better Rates for Pubs campaign, supported by an industry coalition of trade associations, the PMA conducted a survey of licensees to discover the impact of rates payments on their businesses.
More than half (51%) of publicans described the payments as having a ‘major impact’ on their pub’s profitability. Close to half (45%) said that rates accounted for between 6% and 10% of their turnover, while nearly one in three said they took up more than 10%.
Call for reform
There was also a level of confusion among some respondents as to how business rates are calculated and applied to pubs, with more than one-third (35%) stating they didn’t understand the current system.
Business rates are calculated on the basis of turnover to arrive at a pub’s rateable value (RV) figure.
A multiplier set by central Government is then applied, representing the number of pence in each pound of RV that is payable in rates before any applicable relief or discount.
However, just 7% of respondents felt their pub’s current RV was ‘fair’, and an overwhelming 84% said the Government should reform how RVs are calculated. Many licensees suggested pubs should be rated on profit or square footage, rather than turnover.
Revaluation
In terms of other changes to the system, almost one-third wanted a freeze in rates until the economy improves and more than a quarter said that shorter revaluation cycles should be introduced.
Furthermore, seven in 10 stated that the Government should reintroduce the next rates revaluation in 2015, reversing its much-criticised decision last year to postpone it until 2017. Current rates are based on 2008 rental values.
In terms of rates discounts available to licensees, just one-quarter (24%) benefited, with the majority receiving small business rate relief — a variable discount for businesses with an RV of up to £12,000.
This discount is due to expire at the end of March 2014, and is estimated to affect about 16,000 pubs across England and Wales. A key goal of the campaign is to get this rate relief extended.
Almost two-thirds of respondents (63%) said they had appealed their business rates bill, with about half of those seeing a decrease in their payments. However, more than four in 10 are still awaiting a decision.
Barrier to growth
Brigid Simmonds, chief executive of the British Beer & Pub Association, said: “The survey underlines the real depth of concern over business rates and their effect on pubs.
“I hope it encourages publicans to contact their MP in calling for an extension of small business rate relief, which is urgently needed.
“It also highlights concerns over response times to those who query their rateable value, which I will certainly be pursuing — it must be made easier for pubs to have unfair bills reduced.”
Kate Nicholls, strategic affairs director at the Association of Licensed Multiple Retailers, said: “This is another example of where the tax system creates a disparity between pubs and supermarkets — we pay a whopping 15p a pint in rates, disproportionately more than a supermarket — and this acts as a barrier to further growth.”
She urged Chancellor George Osborne to use next week’s Autumn Statement to announce a review of the system and explore options for reform.
Serious concern
The Campaign for Real Ale’s (CAMRA’s) CEO Mike Benner said the results provided further evidence that excessive business rates are undermining the profitability of many pubs.
“The fact that nearly one in three pubs face rates bills accounting for more than 10% of turnover is a very serious concern and indicates that the system has performed poorly in adjusting for falling levels of turnover,” he added.