Pub owners face bleak reality as costs soar and profits vanish
Nick Evans, co-owner of the historic Old Crown Coaching Inn in Oxfordshire, is battling to keep his business afloat as a perfect storm of rising costs threatens to shutter his beloved pub.
A crumbling business model
The pub, steeped in history – including a stay by Oliver Cromwell – is now facing a grim forecast. Evans, a former City trader, admits the hospitality sector has been a relentless series of setbacks since Covid-19, compounded now by a triple whammy of escalating expenses: soaring minimum wage, punitive business rates, and the reverberations of the Iran crisis pushing energy prices to record highs.
A microwave future?
“The only way you can make it work is to have a microwave, staff who can open a packet and put it on a plate,” Evans grimly stated, reflecting a brutal assessment of the current landscape. He and his co-investor, Mike Webb, poured £625,000 into the property shortly before the pandemic and another £350,000 into renovations, aiming to create a charming hostelry. However, with VAT contributions and national insurance now significantly increasing – pushing the business into the red – the dream is rapidly dissolving.
Missed opportunities and a stark warning
Evans is postponing a planned expansion to 20 rooms – a project that would create local jobs – citing the industry-wide reluctance to invest. “Everybody’s stopped investing,” he lamented, highlighting the precarious position of businesses across the sector. A rough estimate of annual revenue is around £1.4 million, but costs – including rising beef prices, increased ingredient costs, and a looming energy bill exceeding £80,000 – are spiraling upwards, threatening to wipe out any possible profit margin. Diageo’s impending price hike on Guinness further exacerbates the situation.
A systemic problem
The situation isn’t isolated. The UK’s hospitality sector pays a far higher rate of VAT than its European counterparts – a long-standing grievance – and the recent hike in employers’ national insurance is disproportionately impacting young workers and women. The recent survey showing one in five hospitality businesses fearing closure within a year paints a bleak picture.
Desperate measures and a last-ditch plea
Evans and Webb are now seeking a more lenient payment plan from HMRC, facing a daunting reality: a business employing 20 people could be forced to abandon its Spanish dream. “It’s been a struggle,” Evans concluded, his voice weary, “It’s tough, tough, tough.”