How many pub closures could there be? Reasons why pubs and bars are struggling 2022 - how many closed in 2021

UK pub bosses have warned the government that there could be ‘mass closures’ unless it introduces a business equivalent of the Ofgem energy price cap.

Energy bills at some establishments have quadrupled as the continuing impacts of the Russia-Ukraine war are felt across the UK.

Brewers are also being hit, with the cost of a pint of beer likely to soar in the coming months.

It is the latest grim assessment for a sector which is being squeezed by record inflation as well as the impact of the cost of living crisis on consumers’ willingness to part with their money.

So what are the key reasons behind why pubs and bars are struggling?

How many pub closures could there be?

The number of UK pubs has already hit its lowest ebb on record, according to research by real estate consultancy Altus Group reported on by the BBC.

There were 39,970 pubs in England and Wales as of June 2022, but this figure marked a drop of more than 7,000 against 2012.

It was the lowest amount of pubs since Altus began recording their numbers in 2005.

Despite the industry having a brief bounce back in 2019 - the first time pub numbers had grown in a decade - the Covid-19 pandemic has put around 600 out of business.

400 closed in 2021 alone.

As well as the effect of Covid on pubs’ ability to open and consumer confidence, longer-term problems establishments have faced include:

• Younger people drinking less than previous generations
• Greater availability of cheaper alcohol in supermarkets
• Taxation

Looking ahead, pub trade publication The Morning Advertiser has reported that pubs face an “extinction level event” in the form of rocketing inflation.

A snap poll of 300 pubs conducted by the website on 20 and 21 August 2022 found 70% of pubs did not expect to survive the winter unless they received more support from the government.

Despite this bleak outlook, hospitality consultancy CGA said it believed pubs would continue to play a “huge role” in UK going forward.

“Soaring costs will inevitably put pubs under sustained pressure in the months ahead—but this channel has seen off countless recessions and economic challenges in the past,” said client director at CGA, Paul Bolton.

“While more closures can be expected, the inclusivity of British pubs and their unique ability to appeal to so many people and on so many occasions mean they will continue to play a huge role for years to come.”

Why are pubs struggling amid cost of living crisis?

There are several key reasons why pubs and bars are facing the prospect of calling time on their operations.

Here’s a brief guide to why you could lose your local:

Rocketing energy prices

In an open letter to the government, pub and brewery bosses have warned of the prospect of mass closures due to the energy crisis.

Unlike domestic energy, the price of which is regulated by the Ofgem energy price cap, businesses are fully exposed to the whims of the energy market.

Prices are currently sky high due to the Russia-Ukraine war.

Given the sanctions Russia - the world’s second biggest producer of natural gas - is under and its threats to switch the taps off, prices are set to remain at unprecedented levels.

CEOs from some of the UK’s biggest chains, like Greene King and Carlsberg Marston’s, have said that not only are some landlords facing 300% hikes in energy costs, but others are struggling to find suppliers who will even give them a quote for their power.

With such high energy prices, pubs cannot make money.

And without a contract with an energy provider, businesses would have no choice but to switch the lights off.

The Morning Advertiser’s research found 65% of pubs had seen their utility costs more than double, while 8% of respondents to its survey had seen increases of more than 500%.

Almost three-quarters said they could not afford the increases to their bills.

Spiralling food and drink prices

Food and drink prices have not only been soaring on supermarket shelves, but have also hit beer pumps and pub kitchens too.

CGA - which is owned by data firm Nielsen - found 60% of operators responsible for 8,500 hospitality sites had seen ‘significant’ levels of food and drink price inflation in the second quarter of 2022.

Front of house, beer prices have risen by an average of 7% since the Covid pandemic.

The situation is set to get even worse as a result of a threat to domestic CO2 supplies, the cost of the energy needed to produce beer, and the price of the raw ingredients that go into the drink.

Carbon dioxide - the gas used to make drinks fizz - is produced as a by-product of fertiliser production.

But the only major UK factory that does this - CF Industries on Teesside - is temporarily halting operations due to high gas prices.

Suffolk-based brewery Adnams has warned the situation could add 50p to a pint later this year.

Meanwhile, key commodities like barley and hops have had their prices increased by the conflict in Ukraine (one of the world’s largest barley producers and exporters) and sky-high farm production costs here in the UK.

Canned drinks have even had their prices pushed up because of the materials they come in, with aluminium prices soaring 50% according to Carlsberg Marstons.

In the back-of-house, ingredients like cooking oil have also become more expensive and more scarce due to the situation in Ukraine.

The weather has also played its part, with the major drought still being experienced by many parts of the UK driving up the price of the potatoes used to make chips.

This situation has arisen because crop yields have been hampered by the extremely dry weather conditions.

Meanwhile, CGA’s survey found supply chain disruption had meant 81% of hospitality firms had had fewer product lines to choose from when buying in food, while another 62% never saw the products they bought in arrive.

Consumer cost of living sentiment

The latest set of inflation figures for July 2022 showed inflation had hit a 40-year high of 10.1%.

The Office for National Statistics has also revealed that real-terms wages have dropped back by a record amount.

It means many households are limiting their spending, which also means businesses are likely to see their sales drop.

This fact is underlined by CGA-Nielsen data showing price is a main driver in decision making for almost half of consumers, with nearly a quarter considering offers and discounts before buying.

What could save the pub industry?

In their open letter to the government published on Tuesday (30 August), pub bosses called for the introduction of a business equivalent of the Ofgem energy price cap.

They said such an intervention would safeguard thousands of jobs and keep pubs open as it would cap the rocketing energy prices businesses are currently facing.

The open letter also called for additional grant support from central government.

A government spokesperson responded: “No government can control the global factors pushing up the price of energy and other business costs, but we will continue to support the hospitality sector in navigating the months ahead.

“That includes providing a 50% business rates relief for businesses across the UK, freezing alcohol duty rates on beer, cider, wine and spirits and reducing employer national insurance.

“This is in addition to the billions in grants and loans offered throughout the pandemic.”

Meanwhile, UKHospitality - a trade body representing around 85,000 pubs, bars, restaurants and hotels - called for the April 2022 increase in VAT for hospitality venues to be scrapped.

The government had introduced a lower VAT rate of 12.5% to help the businesses bounce back from Covid-19.

But the ex-Chancellor Rishi Sunak put the rate back up to 20% in his Spring Statement.

In an open letter to the government, the trade organisation’s CEO Kate Nicholls also called for a business rates holiday for the hospitality sector; deferral of all environmental levies; the reinstatement of HMRC’s Time to Pay scheme; and the reintroduction of a trade credit insurance scheme for energy.

The government pointed NationalWorld to the comment it had already made above in response to Kate Nicholls.