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Introduction The beer industry in the UK provides nearly 900,000 jobs and contributes 23bn annually to the UK economy. The sector also supports the employment of a large number of people in underrepresented groups such as young people and those in regions with relatively high levels of unemployment. However, the government levies a duty on beer which has had a detrimental impact on the beer industry. As a result, beer duty places the employment prospects, especially those of the young and those living in regions where unemployment is relatively high, in peril. Key findings The beer industry and employment The beer industry in the UK provides nearly 900,000 jobs across the country. Many of these jobs are in the regions and countries of the UK where unemployment is relatively high. Chart 1: Unemployment rate (%), UK regions & countries East South East South West East Midlands Wales Scotland Yorkshire North West West Midlands Northern Ireland London North East 0 1 2 3 4 5 6 7 8 Source: ONS 2

Chart 2: Number of pubs, UK regions and countries Northern Ireland North East Wales London East Midlands East West Midlands Yorkshire Scotland South West North West South East 0 1000 2000 3000 4000 5000 6000 7000 Source: Oxford Economics Chart 3: Total direct employment in the beer and pub sector, UK regions & countries Northern Ireland North East West East Midlands Scotland West Midlands Yorkshire London South West East North West South East 0 20,000 40,000 60,000 80,000 100,000 120,000 Source: CEBR As the above graphs illustrate, the beer industry supports employment in every region and country of the UK, including in regions where unemployment is relatively high. The number of pubs and jobs in pubs and bars in each region and country matches closely with the employment and unemployment levels of those regions. Therefore, the importance of the beer industry for employment opportunities in regions and countries of the UK with relatively high levels of unemployment is clear. 3

Not only does the beer industry play a vital role in supporting employment opportunities for the UK as a whole, and in regions and countries where unemployment is relatively high, but it also provides work for a significant number of young people. This is important because data from the ONS & Eurostat reveals that young people in the UK- and across Europe- are far more likely to be unemployed than other age groups. Chart 4: Total direct employment in the beer industry by age group, UK 300,000 250,000 200,000 150,000 100,000 50,000 0 Under 25 25-34 35-44 45-54 55-64 Over 65 Source: Oxford Economics As chart 4 demonstrates, the under 25 age group is the age group with the highest number of people employed in the beer industry. 4

The impact of beer duty The government levies a tax on beer in the form of beer duty. In its 2008 budget the Labour government had increased the rates of duty on alcoholic drinks by six per cent in real terms, and proposed that rates would rise each year by two per cent above the rate of inflation for another four years. The coalition government jettisoned the beer duty escalator and eventually decreased beer duty. Chart 5: Change in beer duty (pence per pint) 3.5 3 2.5 2 1.5 1 0.5 0-0.5-1 -1.5 Mar-08 Sep-08 Mar-09 Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 Sep-12 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-17 Source: HMRC Chart 6 shows the number of pubs and bars in the UK between 2006 and 2016. Although correlation does not necessarily imply causation, there is a very strong correlation between increases in beer duty and the decrease in the number of pubs and bars. Moreover, in the years when beer duty was cut or frozen, chart 6 demonstrates that there was an increase in the number of pubs and bars. 5

Chart 6: Number of pubs and bars in the UK 580,000 560,000 540,000 520,000 500,000 480,000 460,000 440,000 420,000 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 Source: Oxford Economics Beer duty represents a significant proportion of taxation paid by the beer and pub industry in the UK. In addition to beer duty, there is also excise duty on other alcoholic drinks, corporation tax, business rates, and national insurance contributions. Chart 7 highlights part of the tax burden placed on pubs in the different regions and countries of the UK, and also the revenue which they generate for HM Treasury. Chart 7 helps to illuminate the large amount of tax paid by the beer and pub industry in the UK and it also highlights the fact that beer duty accounts for a significant proportion of this. 6

Chart 7: Tax paid by the beer and pub industry ( m), UK regions and countries 1800 1600 1400 1200 1000 800 600 400 200 0 North West London South East West Midlands Yorkshire East Midlands Scotland South West East Wales North East Northern Ireland Excise duty Excise duty on other drinks Total tax paid Source: Oxford Economics Imposing beer duty makes it more expensive for consumers. For example, the current rate of beer duty makes a pint 52 pence more expensive for consumers. We would, therefore, expect any change in beer duty to influence consumer behaviour. For example, if beer duty increased, then we would expect to see sales of beer decrease, whereas if beer duty decreased, then we could reasonably expect the converse to be true. Given that beer accounts for 70 per cent of drinks in pubs we would expect any increase in beer duty to have an impact on the profitability of pubs and so if beer duty increased we would expect to see either a decrease in the number of pubs, a decrease in the number of people working in pubs, or both. An analysis of the data reveals that this is precisely what happened. For example, under the period of the beer duty escalator of 2008-2013, beer duty rose by 42 per cent. During this period 7,000 pubs closed and 58,000 people lost their jobs. Chart 8 demonstrates the decrease in the number of pubs in the UK. It differs starkly from chart 6 which showed the change in the number of pubs and bars in the UK over the past ten years. Whereas chart 6 sees an increase towards the end of the time period, chart 8 is characterised by terminal decline. Given that beer accounts for 70 per cent of drinks sold in pubs, it is not surprising that pubs are far more adversely affected by beer duty. 7

Chart 8: Number of pubs in the UK 70,000 65,000 60,000 55,000 50,000 45,000 1982 1987 1992 1997 2002 2007 2012 2016 Source: CEBR As Snowdon (2014) points out, there are numerous reasons for the decrease in the number of pubs. These include the great recession, changing cultural attitudes, and the smoking ban. However, beer duty has clearly had an impact on the number of pubs which has had a devastating impact on jobs. Thankfully, the beer duty escalator was jettisoned. Analysis conducted by Oxford Economics revealed that scrapping the beer duty resulted in there being 21,000 more jobs than if the beer duty escalator had continued. Although the beer duty escalator was scrapped, beer duty is still incredibly high in the UK. For example, it is 14 times higher than in Germany. Moreover, people in the UK pay 40 per cent of the beer taxes in the EU, but only drink 12 per cent of the beer. Scrapping the beer duty escalator resulted in 21,000 new jobs being created. Therefore, the evidence would appear to strongly suggest that a further cut to beer duty would create thousands of more jobs, and scrapping the duty altogether would create even more. This increase in employment would result in HM Treasury receiving an increase in receipts through income tax and national insurance contributions which would more than offset the amount lost by the reduction or abolition of beer duty. 8

Conclusion The beer and pub industry plays a vitally important role in the UK economy. It supports nearly 900,000 jobs; especially for young people and those living in areas with relatively high levels of unemployment. Beer duty in the UK is incredibly high by international standards and has had a devastating impact on the beer and pub industry. Beer duty currently makes a pint 52 pence more expensive. This influences the behaviour of consumers, making them less likely to buy beer from pubs. This results in pubs going out of business and people becoming unemployed. Analysis reveals that the government s decision to scrap the beer duty escalator had extremely positive results. For example, 21,000 jobs would not have existed if the duty had still been in place. This reduced the burden on taxpayers as an increase in employment results in a decrease in welfare dependency. Moreover, HM Treasury received extra revenue in the form of national insurance contributions and income tax. Beer duty has a direct and negative impact on the beer and pub industry and on employment. Therefore the evidence for lowering it or scrapping it completely is overwhelming. Reducing or scrapping beer duty would result in thousands of extra jobs being created and more money being spent on essential services due to the increase in receipts from income tax and national insurance contributions for HM Treasury. Sources CEBR, Scrapping the beer duty escalator- benefits to consumers, pubs and brewers, 2015. HMRC, Beer Duty Guide, 2017. ONS, Annual Population Survey, 2017. Oxford Economics, Report on Beer Duty for British Beer and Pub Association, 2017. Snowdon, C., Closing Time: Who s killing the British pub?, 2014. 9