COVID-19 consequences update

I thought that readers would prefer it if I isolated all the news relating to COVID-19 (the term that I shall use from here on) in a separate article; you can then decide whether you want to read it or not. It isn’t all bad news however.

Government support: there are just over 4,000 pubs in London. 46% are owned and directly operated by pub owning businesses (POBs) as managed houses; 27% are privately owned and 26% are tenancies with various POBs. It is pubs that are privately owned or are run as tenancies (leaseholds) that count as small businesses.

The Government has set up a number of schemes to assist businesses in general, not just pubs. I won’t go into great detail here but, for those who are interested, I will put together a list and post it here.

The Coronavirus Job Retention Scheme, otherwise known as furlough, has proved very useful, with 90% of pubs using it. It has been extended to the end of October but the Chancellor of the Exchequer has however hinted that the level of support will then be reduced.

Similarly, the cancellation of business rates for the full year was most welcome although it took some time to develop. In the Budget (11 March), the existing discount of 33% was increased to 50% for 2020/21 but it only applied to pubs with a rateable value (RV) below £51,000. London’s pubs are, more or less, split equally between those over and under the £51,000 mark so this was of limited help. Happily however, when the implications became clear, the Chancellor decided to increase the relief to 100% and that it would apply to all retail, hospitality and leisure venues.

Other measures include Business Continuity Grants, business interruption and ‘bounce back’ loans and deferred VAT and income tax payments. Most of these will, of course, have to be paid back eventually and will be additions to the pub’s normal budget.

These measures were not without their complications. Initially, at least, some grants were only available to pubs with an RV below £51,000. A lot of pubs initially found it difficult to obtain the various loans from their banks with some sort of security still being demanded, despite the loans being guaranteed by the Government. 80% of pubs were eligible for a government grant (intended to cover the other fixed costs such as utilities and rent) and the task of making the payments, along with the required funds, was given to local authorities. Some performed better than others. As at 11 May, the City of Westminster had paid out 100% of their grants, followed by the boroughs of Ealing (98%) and Merton (94%) so congratulations to them. London’s worst performer managed just 45%.

Various other organisations also responded to the crisis. Both Sky Sport and BT Sport have stopped billing until further notice. The Performing Rights Society (PRS) will not charge pubs while they are closed.

Breweries: total beer sales for March fell by 40%, which is higher than the pro-rata number of days for which pubs were closed. There was however a corresponding increase of 10% in sales in the supermarkets and off-licences but overall sales were still down substantially. Not all breweries qualify for grants being made available to the ‘retail, leisure and hospitality’ sector or for rate relief. The Society of Independent Brewers (SIBA) conducted a survey in April which revealed that over half of the UK’s smaller brewers had not been able to access any financial help from the Government.

Late Night Levy: the LNL applies where the pub or bar’s licence permits it to open after midnight. It does not have to actually do so for it to be payable. As was explained in a legal opinion in the Morning Advertiser however, there is no flexibility in the scheme, even in the current circumstances. CAMRA has written to all local authorities who operate an LNL asking them to use their discretion. A local authority however cannot waive LNL fees; all they can do is defer payment – in effect turning a blind eye to immediate non-payment – and allow payment over a period. In theory, under section 55A of the Licensing Act 2003, non-payment of the LNL is grounds for suspending a pub’s licence but it is hard to imagine any local authority would risk the opprobrium that doing so would incur. That said, some local authorities have pointed out that they still have to meet the administrative costs that the LNL was intended to cover.

The solution proposed in the Morning Advertiser article was a short Act of Parliament preventing local authorities collecting the LNL for the period that pubs were closed. Eleven local authorities operate a LNL, six of which are in London.

On the subject of London politics, the Mayor of London, Sadiq Khan, wrote to ministers in May asking them to raise the RV limit for claiming retail, leisure and hospitality sector grants from £51,000 to £150,000. In April, Night Czar Amy Lamé also wrote to the borough councils asking them to consider waiving licence fees for a year to match the business rates concession.

Lost beer: the instruction to close came at short notice so most pubs were caught with a fairly full cellar. Being pasteurised, keg beer has a ‘best before’ life of three to four months while cask conditioned beer will only last for six to nine weeks. On the basis that 39,000 pubs had a stock of some 15 nine gallon casks or eleven gallon kegs in stock, Tom Stainer, CAMRA’s Chief Executive, told the BBC that, despite valiant attempts to sell it through takeaways or home delivery, something like fifty million pints had to be disposed of. Tom said, “It’s a very sad waste of all the work and talent that goes into producing great beer.”

The BBC also interviewed Keris De Villiers, who, with husband Lee, runs three Young’s tenancies in Wandsworth (the Ram Inn, the Old Sergeant and the Pig and Whistle). She put a value of about £10,000 on the beers in their cellars, including beer in the tanks at the Sly Beast microbrewery. Keris told the BBC, “We could do takeaways but that would mean selling beer on the corner of a very small pavement. That wouldn’t be socially responsible, with the need for people to keep their distance from one another. The whole situation is heart-breaking. Our brewer literally talks to his tanks when he’s at work every day. People really care about the beer they’re making. It’s a craft and people are passionate about it.”

Dealing with the out of date beer presented a huge logistical problem. Despite HMRC’s concession (see below), it was very difficult for pubs to dispose of the beer on site, especially as they were forbidden to pour it down the drain. The best course of action was, as soon as the closure was lifted, for the brewery or wholesaler to collect the beer and a number of them said that they would do this free of charge. Time will then be of the essence, as they say in contracts. Breweries will, of course, need the kegs and casks back as quickly as possible so that they can refill them. Spare a thought for the draymen here. It is easy to drop a full cask or keg through a pub’s hatch into the cellar but try getting a full one back up in the opposite direction. There are also technical problems with emptying kegs that are pressurised. Financially, all pubs will have had the same basic problem but while the pub owning businesses (POBs) could manage the situation in house for their managed pubs, tenants were in a more complicated situation. Star Pubs and Bars (Carlsberg), Diageo (Guinness) and Greene King said that they would give pubs full credit notes for unopened casks while Heineken and AB InBev said they would provide replacements.

Beer Duty: Her Majesty’s Revenue and Customs (HMRC) routinely refund the duty paid on beer which, for some reason, cannot be sold (ullage) but there are strict rules. Primarily, the destruction of the beer has to be overseen by a ‘responsible person’ from the brewery making the claim. On 30 March however HMRC introduced a temporary notice called ‘Destroying spoilt beer during coronavirus (COVID-19)’. The publican, or an agreed person at the premises, can now carry out the destruction of spoilt beer and ‘an Authorised Company Representative (ACR) from the brewery does not need to be present’. The brewery is however still required to keep (a) an audit trail confirming destruction of duty paid beer, (b) evidence that a full credit of the duty paid goods has been passed to the owner of the goods at the time they were spoiled and (c) keep a spoilt beer record. HMRC also require that the brewery claiming the relief must be happy that destruction has taken place and keep suitable evidence, such as a video which they say the ‘agreed person’ at the premises can record and give to the brewer for their records. HMRC gave no advice as regards what to do with the beer if it could not be poured down the drain.

Note especially (b) above. If the brewery wants to reclaim the duty paid, the sale must be cancelled in full. They can’t, for example, just give the pub a 50% refund. There is therefore still a loss to the brewery in terms of the materials used.

Breweries are liable for beer duty as and when they sell their beer, with payments to HMRC being due quarterly. Despite requests otherwise, HMRC still collected the payments that fell due on 25 March. CAMRA’s chairman, Nik Antona, commented, “CAMRA is disappointed to hear that the Chancellor has decided not to cancel beer duty in light of the current COVID situation. This could have meant the difference between many hundreds of independent breweries standing a chance of surviving this crisis, or closing their operations permanently and never reopening. Many brewers were already faced with the difficult challenge of trying to continue to run their businesses and retain staff, in order to allow customers across the country enjoy great beer – one of the small pleasures still available to people. The postponement or cancellation of beer duty could have helped keep some of these small independent businesses open and trading online, rather than see thousands of pounds sent to HMRC.” James Calder, the Chief Executive of the Society of Independent Brewers (SIBA), made the point that it would have been a more practical approach than breweries applying for Government grants. Ironically, it was probably the beer that that this duty payment covered that was left in pub cellars and upon which the duty will be reclaimed as above.

Insurance: further to my report in the last edition about Ei Group’s business continuity insurance not paying out, this appears to have become the general situation. Tim Foster, the founder of Yummy Pub Company (see also Pub News), told The Caterer magazine that his business interruption policy includes notifiable diseases but, despite the Government having declared COVID-19 to be a notifiable disease, his claim was immediately rejected because COVID-19 was not specified in his policy. The insurance company’s interpretation was that they would only pay out if the reason for the closure of the premises was because someone had contracted COVID-19 on site and not Government instructions. Perhaps I’m missing something here but, given that most of us had not heard of COVID-19 until the early part of the year, how could it have been specifically included in people’s policies? Clearly the ‘word’ that the Chancellor of the Exchequer was going to have with the insurance industry fell on deaf ears.

There was no help forthcoming from the regulatory body for the insurance industry either. In a letter to insurance companies, the Financial Conduct Authority (FCA) said that, based on their conversations with the industry to date, their estimate was that most policies had basic cover which did not cover pandemics and, therefore, there was ‘no obligation to pay out in relation to the Covid-19 pandemic’ and that ‘while this may be disappointing for the policyholder, we see no reasonable grounds to intervene in such circumstances’. The FCA did however urge insurance firms to support customers, saying ‘clear, accurate and timely communication is essential’ and that where there was a valid claim, it ‘must be assessed and settled quickly’, including an interim payment where appropriate. According to the Guardian (23 April), a group of 100 pubs and bars, co-ordinated by the Night Time Industries Association (NTIA), were starting legal action against one particular company. Small businesses also have recourse to the Financial Ombudsman Service so there may be more to come here.

I don’t want to make light of this situation but, with apologies to our younger readers, it reminds me of the Hancock’s Half Hour episode ‘The Insurance Policy’ (1958!).

Security: sadly but predictably, a lot of closed pubs have been targeted by opportunist criminals, who presumably assume that there will still be cash in the till and a stock of alcohol to which they can help themselves. I heard of one pub in Leicestershire that was targeted. It had been properly secured and when the criminals found nothing to take, they simply wrecked the pub. Another, in Hampshire, had all of its furniture stolen. The security advice given to pubs in the Morning Advertiser was, in addition to signs as above, board up back doors, cellar entrances and weak points, leave tills empty and open and make sure that alarms and CCTV are working.

Change to planning rules: this appears not to have been generally reported so thanks to Private Eye (edition 1520) for bringing it to my attention. For so long as it is impossible to hold conventional committee meetings, the Ministry of Housing, Communities and Local Government has given local authorities permission to delegate the authority to approve planning applications to planning officers. The standard tactics in opposing the redevelopment of pubs rely on public pressure directed at politicians. If officers are now taking the final decisions then that is lost.

There is a ‘safety valve’ however, and I thank Geoff Strawbridge for reminding me of it. It only needs one member of the planning committee to request that the application is ‘called in’, in which case it would have to be considered by the committee, even if only at a ‘virtual’ meeting. In the current crisis, perhaps even more so, CAMRA branches and other pub preservation groups need to remain alert to proposals to demolish or convert pubs which may be decided at the discretion of officers and lobby local councillors to ensure that such applications are subject not only to the necessary statutory consultation but also to deliberation and decision by the appropriate Committee.

I may be being paranoid here but I can’t help wondering if the ‘lockdown’ is giving the large POBs time to identify which pubs they will not reopen, using ‘lockdown’ as the excuse, with a view to disposing of them, either to give shareholders a cash windfall or, in some cases, to reduce their debts.

Charities: pubs are, of course, huge contributors to the charity sector. As reported in the Morning Advertiser, PubAid, a group that promotes the work that pubs do for their communities, predicts that charities and grassroots sports organisations will lose around £35 million in donations. Pubs currently generate some £140 million per annum. As reported elsewhere however, some pubs are making a practical contribution to their communities instead.

It could be worse: in South Africa, the Government actually banned the sale of alcohol and cigarettes as part of their ‘lockdown’ rules. The police minister said that this had reduced the crime rate, although there were reports of the looting of liquor shops and there suddenly seemed to be a big trade in a liquid that was contained in used cooking oil containers, some of which was being sold by police officers.

Compiled by Tony Hedger