Average pint will soon cost more than a FIVER amid pub crisis

The cost of a pint could tip well over £5 for the first time this Autumn, as hospitality businesses grapple with a growing hospitality pay crisis.

Research by software brand three rocks®, shows that struggling firms (many of whom rely on service charges to bulk up balance sheets) plan to raise drinks prices by 10%. This will push the average cost of a pint up to £5.22, from £4.75.

The price hike comes ahead of a new law change, which will have big ramifications for hospitality businesses. From October, employers will legally need to give 100% of tips to staff, under the Employment (Allocation of Tips) Act 2023.

Cost of drinking crisis

Rising food and drink inflation has led to a surge in prices across the F&B supply chain, sending menu prices soaring in bars, restaurants, and supermarkets. Going out has become a luxury for consumers; and the new service charges could worsen the problem.

In three rocks®’ survey of 2,500 hospitality businesses, staff and customers, 74% of respondents said they plan to apply a service charge for pouring pints and making cocktails this year. The majority (52%) say they will add a standard charge of 10% to drinks bills.

The change would impact some regions more than others. Buying a pint could drain your wallet by £7.15 in London. This is followed by Belfast (£6.71) and Brighton (£6.60).

Meanwhile, based on the 10% figure, the three cheapest cities in the UK to purchase a pint will be Wrexham (£2.20), Bangor (£2.42) and Dunfermline (£2.97).

Most Brits support US-style tipping culture

There is good news for businesses, however. When three rocks® surveyed drinkers about their views on UK tipping, 73% of pub-goers agreed you should pay extra when buying drinks.

The research means Brits could be ordering a dash of American tipping culture. Across the pond, staff earn very low wages, and payroll is topped up by bigger customer donations.

34% of respondents told three rocks® they think bar staff should get at least 10%-20% gratuity. In fact, just one in ten say they think tips should be abolished in the UK.

Scott Muncaster, founder and Managing Director of three rocks®, said: “Tipping has long been a sticking point for [customers] with many not knowing what to expect and what to give. It’s encouraging that customers are supporting the industry.”

What is the Employment Act 2023?

In October, the implementation of the new Employment (Allocation of Tips) Act 2023 will mean that businesses will legally be required to allocate 100% of tips to their staff.

Today, just a third of hospitality organisations give 100% of tips to the workforce, according to the three rocks® data, which has resulted in a very low pay rate for hospitality workers.

But while the change is welcomed by those in bar and restaurant jobs, who tend to earn the National Living Wage of £11.44 per hour, reaction from SMEs in the sector – many of which rely on tips to make ends meet – is more sober.

Restaurants and pubs are already struggling to cover soaring operational costs, including rising energy bills, business rates, and staff wages.

In a recent Startups survey, 19% of hospitality firms said they would be unable to meet employee pay expectations this year, displaying the most negative sentiment of any sector.

Sadly, their financial pressures look set to worsen this October. One in five firms claimed the law change would increase their annual costs by £60,000-£360,000; an amount that would likely mean closure for many small UK pubs.

More help needed for hospitality

Government support has so far focused on supporting hospitality employees, instead of employers, by raising the minimum wage in April and now, the Employment Tipping Act.

Trade bodies might fairly celebrate the new laws on tippings for their boost to staff pay packets. But the payday is clearly counterbalanced by a very real threat to organisational profit margins and business survival. In this context, the rise in service charges makes sense.

The consequences are already being felt. Since 2020, over 3,000 pubs, clubs, bars, and restaurants have closed in London alone, resulting in an estimated 6,000 job losses.

Muncaster added: “The UK hospitality industry has been under immense pressure in the last few years. Beginning with the pandemic, then one of the biggest labour and skills shortages in decades, and now the cost-of-living crisis, operators need all the help they can get.”