Licensing Act and Late Night Levies: How Alcohol is Costing Your Business

Alcohol License

For many pubs, restaurants and bars, alcohol sales are one of the largest revenue streams for their business. However, a recent call for evidence on the Licensing Act 2003 and the growing introduction of the Late Night Levy may be changing the dynamics of drinking for the hospitality and tourism sector.
On 5 July 2016, the House of Lords committee welcomed the first call for evidence into the effectiveness of the Licensing Act 2003. The main benefit of the act is to give companies more freedom and provide consumers with more choice, such as being able to serve alcohol 24 hours a day. Although the act gives consumers and businesses more freedom, at the same time it allows authorities with powers to address misuse and misconduct of the freedoms. As the act has been in place for 13 years, the call for evidence will review just how effective the Licensing Act is and whether it has caused more harm than good for the sector. As a result, the evidence will focus on:

  • The power belonging to authorities
  • The role the act has on local communities
  • The rights and responsibilities of the industry and the public
  • Whether the act provides restrictions for communities to enjoy activities
  • Unit pricing and its potential impact
  • Fees and costs associated with the act

So, just how much has the act helped to support local businesses? In the UK, the night time economy is worth over £66billion and recruits over 1.3 million employees. Also, the act has allowed other sectors to monopolise, such as the transport sector through the introduction of 24 hour buses and late night trains.

The act has definitely allowed the UK to benefit from a nightlife economy; however, there are several concerns that have been flagged. The main aim of the act was to allow freedoms for all parties; however, this has also brought disorder and chaos.

As a result, the introduction of the Late Night Levy was brought into place. The levy was designed to help better police local communities by introducing a tax for businesses that wish to operate between 12am and 6am. With this regulation working alongside the act many small businesses in pursuit of expanding and increasing business hours have been negatively affected.
Although the act has exposed the UK to a thriving and growing night time economy, for smaller businesses, surviving is becoming increasingly difficult. In 2014, we saw 300 fewer club premises licenses applied for than the previous year and 468 enquiries on the review of the act made by the police.

With the levy being introduced in many of the UK’s popular nightlife boroughs, small businesses who wish to increase opening hours are likely to be affected the most. The late night levy charges are calculated on a rateable value and will be collected annually with 70% of the funds going towards policing and reducing alcohol related crime. Here are the charges as follows:

Rateable Value Bands (based on the existing fee bands A
No rateable value to £4,300
B
£4,301 to £33,000
C
£33,001 to £87,000
D
£87,001 to £125,000
E
£125,001 and above
D
x2 Multiplier applies to premises in category D that primarily or exclusively sell alcohol
E
x3 Multiplier applies to premises in category E that primarily or exclusively sell alcohol
Annual Levy Charge £299 £778 £1259 £1365 £1493 £2730 £4440

Kate Nicholls, chief executive of the Association of Licensed Multiple Retailers (ALMR) stated: “For every £1 cost to stay open after midnight companies already have to generate £4. It’s OK if you’re a late-night business but if you want to be a cafe or restaurant in Shoreditch and stay open late it’s one more deterrent”.

So has the Licensing Act really helped to promote freedom for the sector, or are there other laws that could be better suited to regulate? All in all, removing the act would result in the loss of a booming night time economy, but keeping the act means more money will have to go towards effective parameters. These will be at the expense of business owners and could indeed hinder the growth of smaller businesses.

Chair of the Committee, Baroness McIntosh of Pickering, said the investigation is “long overdue”. The Licensing Act 2003 enabled premises to serve alcohol for 24 hours a day, 7 days a week. While many heralded the Act as the start of a more continental drinking culture, others predicted round-the-clock consumption, leading to disorder and deterioration in public health… But what has the reality actually been like? Has deregulation allowed the drinks industry to thrive? Have drinkers embraced a more relaxed and healthier approach to alcohol? What happened to the anticipated café culture?”

Written evidence on the act must be received by 2 September 2016. The Committee will then report all findings by 23 March 2017. Evidence can be submitted here. If you are a small business operation in an area where the levy is in place and would like to discuss your company’s finances, please contact Adam Moody at adam@raffingers.co.uk
https://www.gov.uk/government/publications/alcohol-and-late-night-refreshment-licensing-england-and-wales-31-march-2014/alcohol-and-late-night-refreshment-licensing-england-and-wales-31-march-2014
http://www.ntia.co.uk/wp-content/uploads/2015/06/Forward-into-the-Night-Report.pdf?567959&567959
http://www.bighospitality.co.uk/Legislation/House-of-Lords-launches-inquiry-in-to-2003-Licensing-Act