Huzzah, we can all look forward to a cheaper pint with the lads and ladies after Chancellor Reeves declared a 1.7% cut to the duty on draft alcoholic beverages.
That’s a roughly 1p-per-pint saving that publicans can, if they so wish, pass onto patrons.
There was semi-decent news for the sector with the continuation of business rates relief for the retail and hospitality sectors, albeit at a reduced 40% rate, down from 75% previously.
That is likely to be taken as a win for the sectors though, given the speculation that rates relief was going to be scrapped entirely.
Shares in pub chain JD Wetherspoon PLC (LSE:JDW) added 2%; Marston’s PLC (LSE:MARS) rallied nearly 6%; Mitchells & Butlers PLC (LSE:MAB) added 2.5% and Loungers PLC (AIM:LGRS) initially surged more than 3%, before much of the froth was removed as trading continued.
Don’t go running down to the nearest ‘Spoons too fast though, for while Reeves did giveth with one hand, she did taketh with the other.
Increases to employers’ National Insurance Contributions (NICs) and the minimum wage at 1.2 percentage points and 6.7% respectively will do a lot of work in offsetting the good contents of the Budget.
NICs went up, but at least NICs didn’t go up
More than half of Labour’s £40 billion tax grab will be funded by increases to National Insurance contributions (NICs).
Businesses themselves will see their NICs increase by 1.2 percentage points to 15% from April 2025, and the threshold for when employers begin paying NICs will also reduce from £9,100 to £5,000.,
The OBR suggested that it will increase employer payroll costs by just under 2%, though that is still an extra bill for Britain’s hospitality businesses to pay, and one which Labour will have a hard time selling to voters.
Especially since a debate over the semantics of Labour’s election pledge not to increase NICs has already erupted. Did this pledge only relate to employees’ NICs contributions, or the whole spectrum of NICs?
More importantly, there is the concern that employers’ higher NICs contributions will end up hitting workers anyway.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown, said: “Heaping extra costs on employers, alongside a planned uplift in the minimum wage will likely result in lower wage increases over the longer term.
“This will impact people’s day-to-day spending as well as their ability to save for the future. We could also see employers look to restrict the wider benefits they offer due to increased costs.”
The latest blow
Going by the market reaction, the Budget was not the apocalypse some in the hospitality sector were expecting.
Pub chain JD Wetherspoon PLC (LSE:JDW) added 2%; Loungers PLC (AIM:LGRS) initially surged more than 3% (before coming back to 0.2%); Marston’s PLC (LSE:MARS) rallied nearly 6%; and Mitchells & Butlers PLC (LSE:MAB) added 2.5%.
But what about the little guys?
For trade body UKHospitality, the Budget “is the latest blow for hospitality businesses”.
“Rising taxes, increasing costs and fragile consumer confidence risk bringing growth to a grinding halt.
“In the short-term, the tsunami of employment costs coming in April will ultimately do more to hamper growth than incentivise it.
“Increases to employer NICs and wages will make it harder for businesses to support employment and invest in their businesses.
“Avoiding the business rates cliff-edge next April was critical and it was important that some relief has been extended. However, the reduced level of 40% is another cost that businesses have to deal with. For those small- and medium-sized operators, their rates bills will still go up in April.”
A £500mln increase
For Emma McClarkin, chief executive of the British Beer and Pub Association, “it is hard to see how this Budget will unlock growth and the critical investment needed to deliver it”.
She continued: “The cumulative impact of today’s announcement means a £500m increase to the cost of doing business for the industry putting pubs, brewers, investment and jobs at continued risk.”
McClarkin called on the government to “do more to comprehensibly back our sector that is so vital to the lifeblood of our communities economically and socially”.
In the meantime, patrons can do their bit by raising a 1p-cheaper pint at their nearest local.