Tim Martin: NICs and labour rates to cost JD Wetherspoon £60m

JD Wetherspoon boss Tim Martin has warned that the imminent increases in National Insurance and labour rates will result in company cost increases of roughly £60m, which would mean about £1,500 per pub, per week. 

He said: “Since labour costs are around 35% of the pub industry’s sales, compared to around 11% for supermarkets, increases of this nature inevitably have a disproportionate impact on pubs, exacerbating the already-wide price differential for customers between the on and off-trade. 

“The combination of much higher VAT rates for pubs than supermarkets, combined with increased labour costs will weigh heavily on the pub industry.”

It comes as the chain of pubs revealed that its operating profits for the 26-week period to 26 January fell by 4.3%, from £67.7m to £64.8m, mainly due to labour and utility costs which in total were £30.6m higher. 

Profits – before tax and separately disclosed items – also fell by 8.6%, from £36m to £32.9m, during the half-year period. 

This is despite total sales rising by 3.9% to £1.03bn during the period, as like-for-like sales increasing by 4.8% due to bar sales and food rising by 4.3% and 5.4% respectively. Slot/fruit machines saw sales jump by 12.4%. 

Meanwhile, like-for-like sales in the last seven weeks to 16 March rose by 5%. 

During the half year, Wetherspoon opened two pubs in Marlow and London, and sold six. The pub disposals gave rise to a cash flow of £3.9m, but there was an exceptional loss of £2.2m.

That said, Martin still anticipates a “reasonable” outcome for the financial year. As of 26 January, JD Wetherspoon traded from an estate of 796 pubs.