Debts threaten pub sector recovery

Only 42% of pub operators are confident their business will return to profit once all Covid-19 restrictions are lifted, citing increased costs and debt repayments impacting revenues.

The recent survey, conducted by the British Institute of Innkeeping (BII), also revealed 55% of respondents have accrued pandemic specific debts of more than £20,000 per site, with more than one in four having debts of up to £80,000.

They will also need considerable time to pay back these debts, with 57% needing more than two years and one in two of those needing more than five years to repay debts.

In addition to this, 72% will be facing full rent payments after 19 July. 

Staffing, menu costs and utilities

Staffing remains a huge challenge for pubs with nearly one in two struggling to recruit the staff they need. Additionally, 72% of operators are having to raise wages for front of house staff.

Forty percent of these have had to increase wages by more than 10% to attract and retain staff. Similarly, 57% have had to raise wages for back of house and kitchen staff, with 48% having to increase wages by more than 10%.

Other rising costs include food, which 43% had experienced (with 59% reporting increases of between 11% and 50%); and 41% say they have seen a rise in the cost of drinks, with 72% reporting a rise of up to 10%.

Utilities costs are also rising dramatically, with 30% reporting an increase from last year. Half of these have seen increases up to 25%, but a fifth have seen rises of up to 50%. Ten percent have either been refused supply, or had to pay up front for their gas, electric or water services.

“The resilience, goodwill and determination of our nations’ pubs has been incredible to witness over the course of the pandemic," says Steven Alton, BII's CEO. "However, it is clear to see that this alone will now not be enough to ensure that their businesses survive.

“The threat is very real as confirmed in The Bank of England’s latest Financial Stability Report, released this week, which points to the particular vulnerability of small hospitality businesses as the economy emerges from Covid-19 restrictions.

“These small businesses are essential and valued hubs of their communities, providing accessible, social spaces for everyone to come together to connect, celebrate and commiserate. Pubs provide so much more than just a place to socialise, contributing significantly to local employment, local suppliers and the wider economy, with the average pub paying around £140,000 into the treasury every year.

“They urgently need support from Government in the form of an extension of the Business Rates holiday to April 2022 for England to match the devolved nations, an extended VAT reduction, an immediate cut to duty on draught products specifically for pubs and an urgent reform of the entire rates system. 

"This support is an investment in the future of not only these vibrant and vital community spaces, but also in the economic recovery of the UK."

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