Wetherspoon's price rise warning as pub chain hit by £60m Budget raid

Customer having a cigarette outside Wetherspoons pub
-Credit:Getty


City experts have issued a warning that price hikes for food and beer at Wetherspoon pubs are "inevitable" due to Budget decisions that have increased its costs by £60 million. The company has attributed this to tax changes, primarily the rise in National Insurance, and an increase in the national minimum wage which will escalate its labour costs.

The firm's outspoken boss, Sir Tim Martin, cautioned that "Government-mandated wage increases" have a "significantly bigger impact on pub and restaurant companies than supermarkets". This information was disclosed as Wetherspoon reported a robust festive period with like-for-like sales growth of 5.1 per cent in the 25 weeks leading up to January 19.

Charlie Huggins, manager of the ‘Quality Shares Portfolio’ at Wealth Club, stated that the budget changes pose a problem for the entire hospitality sector. "The extent of cost increases for the sector is crippling," he said.

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"The £60 million annual increase in labour related costs Wetherspoons is facing is almost equivalent to the entire profit it made last year when profits before tax were £73.9 million."

Two pints of beer bitter on wooden barrel in London pub.
City experts have issued a warning that price hikes for food and beer at Wetherspoon pubs are "inevitable" -Credit:Getty

He also warned: "Price increases are inevitable, but for Wetherspoons this is a delicate balance. "Raise prices too much and it risks ostracising its loyal customer base. Not enough, and margins could come under serious pressure. At least Wetherspoons has scale on its side leaving it better positioned than many in the sector. It will flex these muscles as much as it can to contain costs in other areas. But it's hard to escape the conclusion that, increasingly, its destiny seems out of its own hands and at the mercy of politicians."

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Sir Tim, the head of Wetherspoon, has stated that rising costs have made financial forecasting for the business more challenging. However, he anticipates a "reasonable outcome" for the full year. He took the opportunity during the trading announcement to criticise the differing tax regimes for pubs and supermarkets. "As previously highlighted, supermarkets pay no VAT in respect of food sales, whereas pubs pay 20 percent. This tax advantage allows supermarkets to subsidise the price of beer they sell," he explained.

He continued: "Given the public's love of pubs, the only possible explanation for this tax discrepancy is that prime ministers and other legislators, in the 45 years since Wetherspoon started trading, have been dinner party goers, rather than pub goers. Wetherspoon therefore calls upon Sir Keir Starmer to redress this imbalance, thereby striking a blow for tax equality and ending discrimination in favour of dull (yawn, yawn) dinner parties."

In the first half of the company’s financial year, the group opened two new pubs and sold six. Wetherspoon plans to open nine pubs this year, including locations at London Bridge station, Fulham Broadway underground station, Manchester Airport, Beaconsfield, Wetherby and Bath.

Dan Lane, lead analyst at Robinhood UK, said: "The sector has been punished with a flurry of digs in the form of off-trade drinking, high debt piles, lockdowns and prospective Budget-induced cost hikes. And Martin isn’t holding back on the “dinner party goers”, as Martin says of UK prime ministers over his tenure, who he points to as making the situation worse."

A Wetherspoons representative declined to comment on the potential of price rises across the pub chain.