Government must address rising business costs
The ALMR has welcomed a report by the British Chamber of Commerce that echoes the eating and drinking out trade association’s own warning of rising costs for UK businesses.
ALMR Chief Executive Kate Nicholls said: “The ALMR has been highlighting for more than a year how costs for businesses are rising. The BCC’s report states exactly that, and is a welcome addition to our own efforts to highlight how the Government must be wary rising costs jeopardising businesses growth.
“The 22017 ALMR Christie & Co Benchmarking Report shows operating costs in the eating and drinking out sector rising above 50% of turnover for the first time. If this trend of rising costs continues, many businesses will struggle.
“The BCC’s report identifies employment costs as a significant concern, with the Apprenticeship Levy and rising wage rates as particularly worrisome. Increases to minimum wage rates can be very good for our staff members and customers, but these increases must consider the economic outlook for businesses, not be politically mandated and must be affordable
“The Government could begin to tackle this problem by starting with a complete overhaul of a business rates system that is heaping costs on businesses and undermining confidence and investment.”
Social integration must not cost hospitality operators
The ALMR has reacted to the publication of a report into migrant integration by welcoming its acknowledgement of the value of non-UK workers but warning against additional costs for businesses and disadvantaging companies that employ migrant staff.
The All Party Parliamentary Group on Social Integration has published the report: Integration not Demonisation, voicing concerns about the integration of migrant workers into the UK, and recommending the adoption of regional quotas and the introduction of a levy on employing migrant workers, to pay for social integration projects.
ALMR Chief Executive Kate Nicholls said: “Migrant workers make a hugely valuable contribution to the UK economy and are particularly vital to eating and drinking out businesses and the report rightly acknowledges this.
“We need a legislative approach that gives employers access to the employees they need to grow their businesses. Naturally, with virtually full employment, a significant number of these are going to be non-UK workers, so barriers preventing their easy employment will harm the UK’s eating and drinking out sector.
“It is important to stress that eating and drinking out businesses do not actively court foreign staff members at the expense of British ones. There simply is not the pool of UK labour needed to fill vacancies in our sector and non-UK workers are doing a fantastic job in filling those gaps.
“We need collectively to highlight the importance of non-UK workers, reinforcing the fact that they are welcome in the UK and that the huge contribution they make doesn’t go unnoticed.”
The ALMR has also warned that proposals to introduce a regional quota system of migrant workers or a levy on employing non-UK workers would only heap costs on employers and undermine investment.
Nicholls concluded: “The Government needs to produce and implement an immigration strategy that acknowledges these points and allows for the easy employment of workers from overseas. Crucially, this means avoiding a regional quota system or an employee levy that will only throw up further barriers to growth for businesses and undermine investment.”
PCA report shows need for clarity to avoid further operator costs
The ALMR has responded to the PCA’s report into the Market Rent Only Verification Exercise, by calling for more clarity and guidance to smooth the process for all parties and avoid unnecessary costs for all operators.
The report showed that nearly 500 MRO notices had been served by pub tenants to their landlord, with 11 MRO tenancies agreed and over 130 referrals to the PCA from July 2016 to April 2017.
Kate Nicholls, ALMR’s CEO, said: “It is inevitable that new legislation brings new challenges and the PCA has been given a clear role to oversee its implementation. As it stands, delays and uncertainty are piling costs onto operators.
“The ALMR’s 2017 benchmarking report shows that nearly two-thirds (63%) see a role for the tied model, so it is obviously vital that structures are in place to efficiently and equitably handle MRO cases.
“Yet the overriding message from the report is that, more than a year in, there are still too many grey areas in the process. It needs to deliver assured, decisive action to benefit all parties in disputes. Delays in the process only create unwelcome uncertainties.
“We would welcome a more proactive and conciliatory approach from pub operators. It’s clear that there are some uncommon practices taking place and it’s important that the PCA gives clear guidance on what is legal and acceptable within the spirit of the Code, and to do so at the very earliest opportunity.”
Scottish business rates review must encourage full reform of system
The ALMR has responded to the publication of the Scottish Government’s review of non-domestic rates welcoming steps to streamline the rates system for businesses but calling on both the Scottish and UK Governments to push forward with further reform.
The Barclay review was last year commissioned to chair a review into the non-domestic rates system in Scotland to better support business growth, long term investment and reflect changing marketplaces. Kenneth Barclay’s today makes a series of recommendations for the reform of business rates in Scotland, including:
- An increase in the frequency of revaluations to every three years from 2022
- Targeted reductions in bills to help retain shops in town centres
- A cut in the supplementary charge for large business premises, in line with England
- A legal duty on businesses to provide information for assessors
- An extended 12-month period of rates relief for businesses investing in expansion.
ALMR Chief Executive Kate Nicholls said: “The Scottish Government’s review of business rate contains a few welcome proposals, but falls somewhat short of the wholesale reform that eating and drinking out businesses need.
“An increase in the frequency of revaluations is welcome, to keep the system as responsive and accurate as possible. And the relief for those businesses that have invested and expanded makes a great deal of sense and is something the ALMR has been pushing for. It is illogical and unfair that businesses that have invested time and a great deal of money in to expanding, employing, and renovating and reinvigorating businesses should then have to face a massive rates hike.”
The review’s remit requirement to safeguard revenue neutrality of business rates prevented it from recommending linking increases to CPI inflation, something for which the ALMR has also pushed. Nevertheless, the report included that option for consideration, following “widespread enthusiasm” for CPI linkage.
“The principal of revenue neutrality is a double-edged sword; eating and drinking out businesses have suffered increased bills at the expense of reductions elsewhere. The review clearly wanted to fully recommend a sensible move towards using CPI to measure increases, which would ensure a more responsive and fairer system for businesses.
“There are some good first steps here, but this must be the launch pad for further action and large, root and branch reform of the system. Westminster must also take some inspiration from this and undertake the full review of business rates that was promised at the Spring Budget and included in manifestos before the election.”
Licensed Industry trade bodies present a unified voice on wage costs
The ALMR, BBPA and BHA gave evidence to the Low Pay Commission on Wednesday, outlining investment by businesses in staff members and sector job creation, but highlighting increasing costs that threaten to undermine further investment.
ALMR Chief Executive Kate Nicholls said: “The eating and drinking out sector is one that has been characterised by high levels of growth, strong community and high street investment and record job creation since 2010, with employment up 18% and 1 in 7 jobs created.
“However, that has slowed markedly over the last year to 18 months, partly as a result of economic and currency pressure but largely due to increased regulatory costs, such as business rates, which are in danger of becoming unsustainable in the current trading environment.
“The 2017 ALMR Christie & CO Benchmarking Report shows a drop in growth from 3.4% to 1.1% across the entire sector. At same time, wage costs have jumped by 12% and gross wage costs as a proportion of turnover now stand at 28%.
“Eighty-five percent of businesses have found ways to absorb some of these increased costs, 40% of which have fully absorbed them, resulting in a drop in operating margin, but the sector is approaching a tipping point. Many businesses do not have a cushion against any significant increases and the LPC must understand that large increases in wage rates will threaten future employment and investment.”
BBPA Chief Executive Brigid Simmonds said: “Given current economic uncertainties and the big increases in costs the industry is facing this year, we do need a cautious approach. The National Living Wage cost the industry around £34 million per year in 2016, with the increase to £7.50 this year adding a further £52 million – an average of around £1,600 for every pub.
“We are also facing significant new costs in other areas, such as the four per cent rise in beer duty in the Budget, auto enrolment pensions, business rates, and the apprenticeship levy. The LPC does need to weight all these factors carefully when setting rates.”
Ufi Ibrahim, Chief Executive of the British Hospitality Association said: “The BHA urged the Commission to be cautious in setting rates for the National Minimum Wage from April 2018. As there is only one compulsory rate for all regions and nations of the UK, particular attention must be paid to those parts of the country which are struggling economically.
“Whilst the cost pressures on businesses have been well documented there are real risks to revenue from a weakening in corporate and consumer confidence. It is important that the industry’s growth – especially in employment – is maintained through a responsible NMW settlement.”
Pub sector joins forces to demand business rates reform
A coalition of consumers, pub owners, operators and brewers has written to the Secretary of State for Communities and Local Government Sajid Javid to demand immediate and thorough reform of business rates.
The joint letter, co-authored by the Association of Licensed Multiple Retailers (ALMR), British Beer and Pub Association (BBPA), British Institute of Innkeeping (BII), Campaign for Real Ale (CAMRA) and the Society of Independent Brewers (SIBA) highlights a crippling business rates regime that unfairly and disproportionately punishes pubs, and calls for immediate reform. In a joint comment, the signatory organisations stated:
“We worked very hard in the early part of this year to ensure that rates reform for pubs was on the agenda. The Chancellor took notice of this and pledged to support pubs, but the sector needs wholesale reform of this broken system as a matter of urgency. In the meantime, extending and increasing the £1,000 pub-specific relief would help pubs to continue trading, especially those suffering most acutely, sometimes with the prospect of closure hanging over them.
“All the major political parties included rates reform in their manifestos, so there is cross-party consensus that this issue needs to be addressed. Pubs are being inordinately squeezed by business rates on a level that is not matched in other sectors. The businesses that contribute so much economically and socially, and which have helped to regenerate high streets, are in danger of being forced out of business by a system that does not work.
“The sector is putting this message across with a unified voice to highlight the extent of the problem and the danger that our businesses are facing if the Government does not respond.”