The drop, which was the biggest since 2013, has been put down to a combination of factors including a 3.9% duty increase in March, higher operating costs for pubs, including business rate increases and employment costs, alongside fragile consumer confidence.
The figures, provided by the British Beer & Pub Association (BBPA) also found that beer sales have been largely stable over the past three years after several years of sharp decline. The trade body said this trend had been greatly helped by three 1p cuts in beer duty from 2013 to 2015 and a duty freeze in 2016.
Before 2013, there was a drop of 14% in sales under the beer duty escalator, when a tax hike of 42% from 2008 to 2013 was accompanied by 58,000 job losses and 7,000 pub closures.
Beer duty freeze
BBPA chief executive Brigid Simmonds said: “While it is encouraging to see beer sales rise slightly in 2017, it is still hugely concerning to see on-trade sales fall for the 17th year in a row.
“This shows just how important the decision to freeze beer duty in the Autumn Budget was, particularly after an inflation-busting 3.9% rise in the Spring Budget.”
She added: “Cutting beer duty is hugely important to community pubs where on average, 70% of alcohol sold is beer.
“The Autumn Budget helped safeguard jobs, pubs and investment in a very British manufacturing industry and it is essential that the Government continues to support beer and pubs throughout 2018.
“Further support on duty and tackling disproportionate rates bill paid by pubs remain top priorities for us.”
Need for action
The Association of Licensed Multiple Retailers chief executive Kate Nicholls said the stats meant the Government had listened to beer duty lobbying.
She said: "The beer sales upturn reflects Government having listened to the united industry that lobbied on beer duty.
"However, the continued downturn of beer sale in pubs only emphasises the urgent needs for Government action to address the other prong of our campaigning – business rates.
"The inequitable skew of the current business rates system favours digital enterprises and punishes pubs. It is just not compatible with successful high street and pubs.
"Pubs are facing ever-increasing costs and something has to give. The Government's manifesto committed to reforming business rates and these figures are just the latest proof that swift action is critical."