The report Closing Time – Who’s killing the British pub? claims that taxation, regulation and declining real wages as a result of the recession have been responsible for the closure of more than 6,000 pubs in the past eight years.
Author Christopher Snowden argues that the blame attached to pubcos for closures has been greatly overstated. As a percentage of total pub stock, net closures represent 16.5% in the pubco sector, and 14.6% in the independent sector.
Put simply – the report states - pubco pubs have been closing at almost exactly the same rate as independents.
'Inappropriate'
“The case against pubcos can only be maintained by portraying transfers from the non-managed to independent sector as closures, but this is clearly inappropriate. The All-Party Parliamentary Save the Pub Group, amongst others, has been guilty of misrepresenting transfers as closures in an effort to support their claim that the ‘the non-managed (largely leased/tenanted) sector has seen many more net closures than those of independent freehouses’ and that ‘pubco pubs are being sold off for alternative use and bulldozed in their thousands’.
“The mere fact that pubcos have sold large numbers of pubs to the independent pub sector does not mean that the ‘tied pub model is a major contributing factor to an increased rate of pub closures,” the report states.
Damaged
The report says the past seven years have been characterised by a flurry of policies which have “severely damaged” the pub industry.
The rise in alcohol duty and introduction of a duty escalator, combined with the increase in VAT to 20% and falling real wages during the recession, have resulted in drinking out becoming much less affordable.
Snowden puts forward a number of solutions:
- Halve alcohol duty. British drinkers pay 40% of EU’s entire alcohol duty bill; the Government should halve alcohol duty to bring it in line with the European average, which would reduce both the cost of living and alcohol fraud
- Reduce VAT from 20% to 15% and introduce a lower rate of VAT for food sold in pubs and restaurants, as happens in many European countries
- Relax the smoking ban. The UK has one of most uncompromising smoking bans in the world. There is clearly a market for venues that allow smoking in one or more ventilated rooms.
- Abolish cumulative impact zones, which currently prohibit new pubs from opening in areas of high demand.
Regressive
“British pubs may be suffering from long-term cultural shifts, but government policies have hugely exacerbated this trend. Taxation and regulation have been the leading causes of the decimation of the UK pub industry since 2006. The level of alcohol duty in the UK is hugely regressive, hitting the poorest the hardest,” Snowden said.
“Taxes must be lowered, and one-size-fits-all policies like the current smoking ban must be reconsidered if we are to temper the rate of decline of the British pub.”
In response Greg Mulholland MP, chair of the Parliamentary Save the Pub Group, said:
“Of course the All Party Parliamentary Save Group know that there have been challenges and has campaigned for lower beer duty, VAT and are also calling for lower business rates for genuine community pubs (which the IEA report seems to oppose).
“The Save the Pub Group are all for sensible changes to reduce regulatory burdens on business and have fairer taxation for pubs, but it is extraordinary that this someone who claims to believe in market economics is defending the very instrument responsible for restricting licensees with the hugely burdensome terms of the pubco tie. For Mr Snowdon to defend this anti-competitive model and the closed shop it has created, is just bizarre.
“This is another desperate last gasp in the death throes of one of the most anti-competitive and anti-free market business models in modern UK history and if this is the best the anti-reform brigade can do with this flawed unsubstantiated nonsense, then the many credible organisations backing reform have little to worry about."
BBPA response
BBPA chief executive Brigid Simmonds said: “This report is a welcome burst of new and balanced analysis into the debate, by a leading independent think-tank.
“It clearly concludes that the tie is not the cause of the economic difficulties in the sector, and that wider economic forces, coupled with high taxation and overregulation during very challenging times for the industry, are really to blame.
“The IEA has also concluded that claims from some, that tied pubs have been closing at a faster rate than non-tied pubs, are a misrepresentation of the reality.
“I hope the report serves to galvanise the industry and Parliamentarians into focusing on the key policy issues that need tackling, not least the still huge rates of beer duty in Britain.”
Download the full report below: