Brewing chief’s £7 a pint warning goes straight to the heart of hospitality crisis

Mr Mahon has also commented compassionately on mental health matters. A trustee of Tiny Changes, the Scottish mental health charity for young people, he spoke eloquently about the impact of the pandemic on the entrepreneurial community in the darkest days of the crisis.

More recently Mr Mahon has emerged to discuss a crisis of a different kind. As the cost of doing business becomes ever more acute for companies in the brewing and hospitality industries, Mr Mahon generated headlines last week when he warned the average price of a pint could top £7 in some cities.

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The price of a beer may not sound like the most pressing concern in the world, especially when compared with the struggle to access clean water and the mental health problems faced by so many in society. But it goes straight to the heart of a crisis that threatens the existence of thousands of businesses, and even more livelihoods. Citing the soaring cost of energy, carbon dioxide and raw materials such as wheat and barley, which have been driven up by Russia’s war on Ukraine, as well as the prospect of a hike in alcohol duty, Mr Mahon declared that the overheads now facing the brewing industry have reached “eye -watering levels”.

“I used to think ‘perfect storm’ was a cliché until we found ourselves slap bang in the middle of what the industry is facing now,” Mr Mahon said. “It is perhaps a greater long-term challenge than that created by rolling Covid lockdowns.

“From what we are seeing, the pressures on the industry with cost price inflation challenges and the Chancellor’s scrapping of the alcohol duty freeze might make a £7 pint the norm rather than the exception in many places – particularly in bigger cities. This is bound to make a pint a relative luxury for a lot of people, something we should all be concerned about and force us all to take stock of the challenges facing the beer industry.”

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The scale of the current crisis was encapsulated by a major survey published on Monday, which found more than one-third of businesses in the hospitality sector across the UK are at risk of failure in early 2023. The survey, conducted by major trade groups UKHospitality, the British Beer & Pub Association, British Institute of Innkeeping and Hospitality Ulster, found 35 per cent of respondents expect to be operating at a loss or unviable by the end of the year, as the cost of doing business continues to take a heavy toll on the industry.

The findings, which also underlined the impact of rampant inflation on consumer confidence, sparked fresh calls for government on both sides of the Border to act to at least stem the tide of business failure. Chief among the measures industry campaigners are calling for is a cut in value-added tax, which it is argued is the one of the fastest ways to inject cash into businesses and give confidence to consumers when inflation remains so high, and mortgage rates are rising.

Scottish industry figures have also made repeated calls for relief from business rates, which have returned to their full level north of the Border after respite from the tax was provided over the first two years of the pandemic.

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“Right now, a reduced rate of VAT of 10% (from 20%) is vital for our businesses to give them financial headroom and boost consumer confidence,” said Leon Thompson, executive director of UKHospitality Scotland. “The case to deliver a reduced rate of VAT is compelling, enabling hospitality to keep delivering economic renewal and jobs in every community across Scotland. The Prime Minister certainly supported hospitality as Chancellor during the pandemic and we are making the strongest case for support to the new Chancellor.”

While the determination of the industry to fight its corner is admirable, as indeed it has been since the pandemic began, the mood music emerging from the Westminster Government would suggest a cut in VAT is unlikely. Even though it is argued that reducing the tax would stimulate consumer spending, the messaging that has emerged from the Treasury in recent days is that ordinary people should expect to be paying more in the coming years as the Government seeks to remedy what it sees as a black hole in the UK’s public finances. We will know the answer for sure on November 17, when Chancellor Jeremy Hunt delivers the Government’s much anticipated “medium-term fiscal plan”.

By that stage, the football World Cup will have kicked off in Qatar. The World Cup is the biggest sporting event on earth and has traditionally been relied upon to boost coffers across the brewing and hospitality trades, but it is unclear what impact it will have this time – not least because some consumers may decide not to tune in amid concerns over the host nation’s record on human rights.

Commenting on its results for the six months ended August 31 last week, David Forde, chief executive of Tennent’s Lager owner C&C Group, highlighted the World Cup and the prospect of the first “unrestricted Christmas trading period for three years” among “tailwinds” going into the second half. But he also warned the outlook for the second half was “challenging, with inflationary pressures on our own margins as well as those of our customers, and the cost-of-living pressures on the consumer environment in the near-term”.

Moreover, as Mr Thompson at UKHospitality observed, the unusual winter setting of the event means there is unlikely to be any opportunity for fans to gather in beer gardens to watch the big matches unfold.

As for Christmas, the picture is equally unclear, particularly as the cost crisis has already caused so many hospitality venues to close, or at least scale back their operations.