Wednesday 10 December 2014

Closing Time



I've got a new IEA report out today which looks at the recent decimation of the pub trade. I've written a blog post about it here and this is the press release:

Taxation, regulation and declining real wages as a result of the recession have been responsible for the closure of more than 6,000 pubs in the past eight years.

The last forty years have been characterised by a drastic decline in the pub industry, yet  since 2006 the number of pubs has plummeted from just over 58,000 to 48,000, a drop of nearly 20%.

In a new report, Closing Time – Who’s killing the British pub?, Christopher Snowdon looks at the long-term trends - such as changing tastes and the shift towards home drinking – and finds that these alone do not explain the rapid acceleration of pub closures in recent years. Instead, policies such as the smoking ban and alcohol duty escalator are responsible.

Debunking the myth that PubCos are to blame, as well as misplaced calls for government intervention in the form of taxpayers’ money to boost failing pubs, the paper finds that government policy has actively discouraged people from spending time in the pub. To end the downward spiral of the industry, alcohol duty and VAT must be lowered, and one-size-fits-all policies such as the smoking ban must be reconsidered.

Cultural changes
  • The decline in alcohol consumption over recent years has been largely driven by a fall in beer consumption, with wine and spirit sales remaining largely unchanged since 2003. This colossal decline has been hugely damaging. On a per capita basis, there has been a 16% fall in beer purchases in the off trade since 2003, but a massive 54% fall in beer purchases in pubs, meaning that pubs are selling half as much beer as they did eleven years ago.
  • Economic changes have led to better domestic living conditions, a shrinking of the working class and decline of heavy industry, which explain some changes to the health of the pub industry. The post-2006 decline, however, is exceptional and gradual cultural change cannot explain it.
Taxation and red tape
  • The past seven years have been characterised by a flurry of policies which have severely damaged the pub industry. In 2008 the government raised alcohol duty by 6% in real terms and introduced a duty escalator that automatically increased alcohol taxes by 2% above inflation every year thereafter. In 2011, VAT rose to 20%. Combined with falling real wages during the recession, drinking has become much less affordable. The escalator was finally abandoned this year, yet taxes remain high.
  • So-called ‘24 hour drinking’ legislation has seen pubs extend opening hours by an average of just 27 minutes. The smoking ban has, however, had a huge impact. Although only 20% of Brits smoke regularly, smokers have always been disproportionately more likely to drink and visit pubs. Following the introduction of the smoking ban, the amount of pub customers who smoked fell from 54% to under 40% in just two years.

PubCos
  • The blame attached to PubCos for the decline in pub sales has been greatly overstated. As a percentage of total pub stock, net closures represent 16.5% in the PubCo sector, and 14.6% in the independent sector. Put simply, PubCo pubs have been closing at almost exactly the same rate as independents.
Solutions
  • Halve alcohol duty. British drinkers pay 40% of the EU’s entire alcohol duty bill. The government should halve alcohol duty to bring it in line with the European average, which would reduce both the cost of living and alcohol fraud.
  • Reduce VAT from 20% to 15% and introduce a lower rate of VAT for food sold in pubs and restaurants, as happens in many European countries.
  • Relax the smoking ban. The UK has one of the most uncompromising smoking bans in the world. There is clearly a market for venues that allow smoking in one or more ventilated rooms.
  • Abolish cumulative impact zones, which currently prohibit new pubs from opening in areas of high demand.
Commenting on the paper, its author Christopher Snowdon, said:

“British pubs may be suffering from long-term cultural shifts, but government policies have hugely exacerbated this trend. Taxation and regulation have been the leading causes of the decimation of the UK pub industry since 2006. The level of alcohol duty in the UK is hugely regressive, hitting the poorest the hardest. Taxes must be lowered, and one-size-fits-all policies like the current smoking ban must be reconsidered if we are to temper the rate of decline of the British pub.”


You can download the report for free here.

12 comments:

Christopher Snowdon said...

The health zealots are quite happy to see a decline in pub numbers. I believe they anticipated it in the wake of the ban. Indeed, possibly one the hidden motives for introducing it. It's obvious the the ban was designed to restrict smokers socialising and been seen having a good night out. Why not drinkers? After all, alcohol prohibition is the Holy Grail.

Christopher Snowdon said...

Why go to a pub? Get you beer for a quarter of the price in the Offy, or super market, take it home, drink with WHO you want, smoke what you want, and listen to what you want, and not some load of wankers playing with their balls on T.V, competeing against the idiot attracting pings, squeeks, and beeps from some bloody fruit machine, all backed up with a duke box full of crap, ALL playing at the same bloody time!

Christopher Snowdon said...

Very well done as usual Chris!

Christopher Snowdon said...

Excellent read....

Just one tiny error I spotted - the VAT rate in Cyprus is 19%, not 25%.

Christopher Snowdon said...

Hi Chris, ASH has made a lot of this on ASH news. You are described as "pro smoking"

Christopher Snowdon said...

The cost of heating and lighting energy is forcing many pubs to drastically reduce their opening times during late autumn through to late spring . . Thats 4 or 5 months of lost revenue . . This also affects trade later in the year as your customers lose confidence . . The British pub is a part of our culture . . Lets not lose it people .

Christopher Snowdon said...

You said it like it is, as usual. You will at best be ignored, at worst pilloried for looking at the naked Emperor.

Christopher Snowdon said...

'There is clearly a market for venues that allow smoking in one or more ventilated rooms.'
My first reaction - this will never happen! Once bans are in place, they stay in place.
But is this assumption correct? Are there examples of lifestyle regulations being rolled back?

Christopher Snowdon said...

Bans are sometimes rolled back eg. http://velvetgloveironfist.blogspot.co.uk/2010/02/smoking-bans-on-ropes.html

Alternatively, many countries settle for introducing a ban of some sorts and then not enforcing it.



Neither of these happen much in the English-speaking world where Anglo-Saxon puritans meet jobsworths.

Christopher Snowdon said...

That's interesting, and encouraging! And there's the Danish fat tax too. But, as you say Chris, there are not many examples in the UK or Australia.

Christopher Snowdon said...

'Jobsworths'! Hehe, love it.

Christopher Snowdon said...

Your findings really aren't surprising, anyone with any sense would have predicted that the smoking ban would adversely affect pub trade. Apart from Camra that is, but who are they to speak for the majority of pub goers these days? IMHO they are just a self-styled elitist group who try and preserve a drinking model that has long gone. I used to be a member of CAMRA many years ago before the smoking ban but got thrown out for being caught drinking lager on a hot day. Pathetic, they are no better than purist anti-smoking groups who try and force their totalitarian agenda on others, ostensibly for their own good.