Unlock the Editor’s Digest for free
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
JD Wetherspoon has warned it is facing a near £60mn increase in taxes and business costs and that the UK hospitality sector will be forced to hike prices following the recent Budget.
The no-frills pub chain, which operates 797 sites nationwide, said on Wednesday the jump in costs — which includes an estimated 67 per cent rise in national insurance contributions — would fuel inflation.
“Cost inflation, which had jumped to elevated levels in 2022, slowly abated in the following two years, but has now jumped substantially again following the Budget,” said founder and chair Tim Martin. “All hospitality businesses, we believe, plan to increase prices, as a result,” he added, saying that Wetherspoons will make “every attempt to stay as competitive as possible.”
Shares of listed pubs were hit by chancellor Rachel Reeves’ announcement last week that employers’ national insurance contributions will rise by 1.2 percentage points to 15 per cent from April, while the earnings threshold at which the tax kicks in will fall from £9,100 to £5,000.
Minimum hourly pay for adults will rise 6.7 per cent to £12.21, with larger increases for younger staff. Additionally, employers are facing costs of up to £5bn a year linked to an overhaul of workers’ rights.
Industry group UKHospitality said last week that for the sector to cover the full extra costs of Reeve’s Budget prices would need to rise 6 per cent, arguing the annual cost of employing a full-time staff member would rise by an “eye-watering” £2,500.
While a summer of sporting events, including the Paris Olympics, has given a boost to the hospitality sector, companies are still navigating challenges having emerged from the pandemic into a period of surging inflation, labour shortages and a cost of living crisis that has put a squeeze on consumers.
In September, businesses including restaurants, pubs and bars in the UK posted year-on-year sales growth of 1.7 per cent which matched the monthly inflation rate, following below-inflation sales growth of 1.5 per cent in July and 1.3 per cent in August, according to the CGA RSM Hospitality Business Tracker.
Martin’s comments came as the group said in a trading update that like-for-like sales in the 14 weeks to November 3 were 5.9 per cent higher than the same period last year, driven by demand for its drinks. Its shares were up 3.2 per cent on Wednesday morning, following an 11.4 per cent drop last week.
Wetherspoons, which last month declared its first dividend since the pandemic after annual profits bounced back, said it was “confident of a reasonable outcome for the year, although forecasting is more difficult given the extent of the increased costs”.