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The Treasury is to hand the struggling pub sector a new support package worth around £100mn a year after being warned of mass closures and job losses unless relief is provided.
The relief is expected to be announced as soon as Tuesday, according to people briefed on the matter.
Chancellor Rachel Reeves has been under pressure to offer a lifeline to the pub industry after officials admitted they had not foreseen the impact of the Budget’s changes to business rates on the sector or predicted the intense backlash.
Reeves has also been barred from her local pub, the Marsh Inn in her constituency of Leeds West and Pudsey, as part of a campaign by landlords to ban Labour MPs in the wake of the business rates row.
As well as earmarking the £100mn for pubs, the government is also trying to sell its message that licensing reforms, including allowing extended hours, will help the industry. It is not expected to reduce VAT on beers, spirits and wine despite recent calls from celebrity Michelin chef Tom Kerridge to lower the tax from 20 per cent to 10 per cent.
Last week Reeves suggested that pubs were in a different situation to other hospitality businesses, disappointing restaurants, cafés and hotels that had been given hope that the whole sector would receive support.
“The situation the pubs face is different from other parts of the hospitality sector but we will be setting out the detail in the next few days,” Reeves said on the sidelines of the World Economic Forum in Davos.
At the Budget, Reeves introduced a £4.3bn support package that included giving relief to businesses to offset the ending of a Covid support scheme that reduced bills last year by 40 per cent.
However, this support has not been enough to offset the increase in property tax bills, caused by the first revaluations of properties since the pandemic, forcing Reeves into a U-turn.
The government’s new transitional relief caps were designed to stagger the level of bill increases, but businesses have complained that the increases in the third year are unaffordable.
For the average business with a £200,000 property the bill increase is capped at a 15 per cent increase next year, 25 per cent plus inflation in 2027/28 and 40 per cent in 2028/29.
Pubs across the UK will face an average 76 per cent increase in their business rates bills over the next three years, while hotels face an even larger 115 per cent rise, according to UKHospitality.
Industry analysis had previously suggested that if pubs were given 30 per cent relief from the new business rates bills it could cost the Treasury £200mn a year by 2029. However, if that level of discount was applied to the whole sector it could be up to £1.2bn.
The Treasury said: “We recognise the significant value pubs bring to communities and the chancellor and prime minister have been clear that we are determined to support them.”
Emma McClarkin, chief executive of the British Beer and Pub Association, said: “We welcome the government looking at ways to support pubs, which have unique social value and are a vital employer.
“In the long term we want to work with government to help pubs thrive through permanent, meaningful business rates reform, a beer duty cut, a fundamental regulatory reset and mitigation of soaring employment costs.”