Survey of Pub Prices January 2025

Click here to read the Survey of Pub Prices January 2025.

From the jaws of a recovery, the Autumn Budget is set to pile more cost pressure onto the Pub Sector in 2025, which is likely to be unsustainable for many.

Following the traumatic events of the pandemic that destabilised the world and had a particularly heavy impact on the hospitality sector between March 2020 and summer 2024, the pub sector could be excused for thinking that it was long overdue a period of stability and (whisper it quietly) growth. Indeed, the economic indicators were starting to align. Inflation seemed under control, touching 1.7% in Sept 24, and interest rates had started to come down falling 0.5% between August and November to 4.75%, with the expectation of further cuts throughout 2025.

By the end of the year, however, the economic indicators were not looking quite as positive. GDP had slowed and was below estimates, inflation was increasing above the target 2% rate and interest rate cuts were looking unlikely in the short term.

Looking ahead into 2025 it now appears that both the economic and trading outlook will continue to be extremely challenging. The Autumn Budget is set to pile significant additional costs onto pub operators, at a time when many are already barely breaking even.

The effect of the Budget is estimated to increase costs for hospitality by £3.4bn. Analysts calculate this will mean a 5% increase in prices to the consumer, just to cover the direct cost increases arising from reducing Business Rates relief, NI and NMW changes. In addition, there will be further cost rises as the supply chain absorbs similar increases and is forced to increase charges for goods and services to the on-trade.

The effect is likely to be rising inflation, particularly from April 2025. This will reduce the likelihood of further reductions in the BoE base rate, which is desperately needed to reduce the cost of capital and stimulate economic growth.

Some of the increase in costs will have to be absorbed by the consumer, but, after several years of inflation busting increases, the million-dollar question is how much further can the trade go on price? At what point do customers become resistant to price rise on top of price rise? Despite historically proven inelastic demand, when does the cost of a pub visit become unaffordable?