What the Budget 2012 means for the bars and pubs

We all watched the budget with interest to see how it was all going to affect the drinks industry. We all still like our Friday nights out! Overall, it could have gone a lot worse.

We have seen increases every year on spirits and wine since the financial ‘crisis’ reared its ugly head, and that has meant a knock on increase for importers, distributers, wholesalers all the way to the pubs and bars and therefore the average guy and girl out for some fun and relaxation. Tobias Jackson of Adventure Bar, a company with four venues in London says "This has been met warmly in the drinks industry. We have endured increased direct costs of 16% since 2009 so this should now slow down."

What about beer? Beer was spared an increase too this week, but a previously announced duty increase is due to go up 5-10p per pint from April anyway. Customers will see this increase but over the whole industry, this is still a good result.

Another measure that will affect the on-trade industry is the corporation tax reduction. This is better news for the bigger players as they will be allowed to keep 1% more of their profits straight away, and an additional 2% from April 2014. It is unlikely that the consumer will see this benefit with reduced prices. However, price increases are far more likely to remain in line with inflation in the next 12 months. Inflation is currently sitting up at about 4% but this is likely to fall with projections that we could hit as little as 2% within 12 months.

The average consumer should maintain a similar disposable income in the next year with council tax rates being frozen all over London and even reduced in some London boroughs such as Wandsworth.

All in all, the prices of drinks shouldn’t be increasing noticeably as they have in previous years. Look for prices to remain competitive for the big players in the pub industry such as JD Weatherspoon and Youngs. In the bar sector, we should continue to see a flood of new bars opening up in London, keeping London as one of the top cities in the world in which to go out in.

What do the bar trade think? "Well, I’m looking with hope more than expectation that the VAT rate might one day go back down." explains Tobias. "We will need to reduce the deficit significantly before (if ever) this happens but if it does, we will certainly be helping our customers celebrate, put it that way!".