Price rises forcast

As we navigate the evolving landscape of the UK’s pub industry, it’s essential to understand the recent fiscal changes and their implications for both businesses and patrons. The Autumn Budget 2024 introduced several measures that will significantly impact the sector, particularly concerning alcohol duty and operational costs.

Alcohol Duty Adjustments

Effective from 1 February 2025, the government has implemented a dual approach to alcohol duty:

1. Increase in Duty for Non-Draught Products: Alcohol duty rates on non-draught products, such as bottled beer, wine, and spirits, will rise in line with the Retail Price Index (RPI) inflation. This means consumers can anticipate price increases for these beverages in both pubs and retail outlets. 

2. Reduction in Duty for Draught Products: Conversely, to support the hospitality industry, the duty on draught products served in pubs and bars will be reduced by 1.7% in cash terms. This reduction aims to bolster pubs by making draught beverages more affordable for consumers, effectively decreasing the duty on an average-strength pint by 1 pence. 

Operational Cost Increases

Beyond adjustments in alcohol duty, pubs are bracing for additional financial pressures:

• Employer National Insurance Contributions (NICs): Starting in April 2025, employer NICs will rise from 13.8% to 15%, and the threshold for paying NICs will decrease from £9,100 to £5,000. This change is expected to generate £25 billion annually for the government but will increase the financial burden on businesses. 

• National Living Wage: The National Living Wage is set to increase to £12.21 per hour from April 2025, further elevating labor costs for pubs and other hospitality venues. 

Industry Response

Shepherd Neame, Britain’s oldest brewer operating over 300 pubs and hotels, has reported strong festive trading, with like-for-like retail sales up 7.4% for the five weeks leading to 6 January 2025. Despite this positive performance, the company anticipates an additional £2.6 million in costs due to the upcoming increases in NICs and wages. To mitigate these expenses, Shepherd Neame plans to implement price increases and pursue efficiency measures over the next 18 months. 

Looking Ahead

The combination of rising operational costs and adjustments in alcohol duty presents a challenging environment for the UK’s pub industry. While the reduction in duty for draught products offers some relief, the overall financial landscape necessitates strategic planning and adaptability from pub operators. Consumers should be prepared for potential price increases and are encouraged to support their local establishments during this transitional period.

As always, we at Pub Pilgrims will continue to keep you informed about these developments and their impact on your favorite local pubs. Stay tuned for more updates and insights as we navigate these changes together.