The boss of the pub chain Greene King has called for changes to business rates to remedy “unfairness” that he said added to financial pressures on the struggling pubs industry.
Nick Mackenzie, Greene King’s chief executive, said the business rates system of property taxes should be changed to a tax on profits.
The British pub industry has complained that it is under pressure from a series of increasing costs. The trade body the British Beer and Pub Association (BBPA) said last week it expected pub closures at a rate of more than one a day during 2025, adding to the 350 net closures during 2024. It said business rates were a factor in those closures.
The industry argues that the current system, based on the rateable value of the property, means businesses must pay the tax even when they are losing money. The crucial valuation on which rates are based is “fair maintainable turnover”, a measure that looks at how much a pub should expect to sell in a year, without necessarily taking into account changes to costs.
Pubs also tend to occupy high-value buildings, while being run on very tight profit margins, meaning business rates bills can be much larger than might be expected.
“Pubs are going to be around for the long term, but we need to address the unfairness in the system to allow them to flourish,” he said.
“It isn’t fair that the sector has 0.4% of the rateable property but pays 2.1% of the bills. The sector is a massive employer and incredibly important for local communities, so we just feel it is important to underline how beneficial it is to tax pubs fairly.”
Greene King, which runs 2,600 pubs, restaurants and hotels, reported a loss of £147m before tax in its 2024 financial year. It said that pubs faced a layering of unavoidable costs that were changing the economics of the sector, making it more difficult to survive. Those costs included the impact of increases to employers’ national insurance contributions imposed in the October budget by the chancellor, Rachel Reeves. Unlike corporation tax, the national insurance measure does not take account of profitability, adding to costs even for heavily loss-making pubs.
Business rates costs for pubs increased this year. Along with other hospitality businesses, they were given 75% relief from business rates during the coronavirus pandemic, but Reeves cut the relief to 40% in the budget in October.
More than 252,000 shops, cafes, pubs, restaurants and other hospitality businesses such as bowling alleys were affected by the change, according to estimates by the consultant Altus Group. It said the change would impose extra costs of £545m on the sector.
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Emma McClarkin, chief executive of the BBPA, said: “It has never been more urgent for government to overhaul the outdated and unfair business rates system as our sector, which makes huge economic contributions and has priceless cultural value, is one of the most highly taxed industries in the UK.”
The UK needed to “sit up and face the reality that unless they act now, they could oversee irreversible damage to our beloved pubs and brewers”.
Pubs have also been hit with higher energy costs over recent years since the invasion of Ukraine by Russia, plus new costs for disposing of glass.