JD Wetherspoon has warned that Britain’s pubs are facing mounting pressure from higher wages, business rates and other costs, after the group reported a sharp fall in annual profits despite stronger sales.
The pub operator said pre-tax profit dropped 28 per cent to £58.6 million in the year to July 26, as a 5.3 per cent increase in costs outweighed growth in revenue across its 792-strong estate.
Tim Martin, Wetherspoon’s chairman, used the results to call on the Government to resist further tax increases, arguing that the hospitality sector had already absorbed a disproportionate share of rising costs.
“The hospitality industry, as many commentators and companies have noted, has borne the brunt of government-led tax and regulatory cost increases, especially in the last two budgets,” Martin said.
“This has resulted in pubs becoming even more expensive than supermarkets, leading to job losses, closures and high street dereliction.”
The pressure on Wetherspoon’s finances was particularly evident in its employment bill. Wage costs increased by £46 million during the year after the national minimum wage rose 4.1 per cent.
Repair costs increased by a further £31 million, while the company’s business rates bill rose £9 million to £42.6 million, despite relief measures for pubs.
The increases came despite a relatively strong performance from customers. Total sales rose 5.2 per cent, while like-for-like sales increased 4.2 per cent.
Drinks provided the strongest source of growth, with bar sales rising 6.1 per cent compared with the previous year. Food sales increased 1.2 per cent, while revenue from slot and fruit machines rose 7.4 per cent. Hotel-room revenue increased 1.3 per cent.
More recent trading has been stronger still. Wetherspoon said like-for-like sales increased 8.6 per cent during the nine weeks to September 27, helped by what it described as “exceptional weather”.
The company also pointed to “substantial progress” in expanding beer gardens and outdoor seating, allowing its pubs to benefit from stronger demand during the warmer months.
The results nevertheless highlight the difficult economics facing hospitality businesses, where labour-intensive operations leave companies particularly exposed to increases in wages and property-related costs.
Martin said the tax burden on pubs and restaurants was already substantial and urged ministers not to add to it.
“It is to be hoped that the powers that be will refrain from any further increases, since pubs and restaurants pay around 40% of their receipts as taxes of one sort or another – and provide immense financial support to the Treasury, as well as social support to the community.”
Wetherspoon’s figures come as the hospitality industry faces continuing pressure to maintain prices while absorbing higher operating costs. For consumers, pubs are competing with supermarkets and other forms of leisure spending at a time when household budgets remain under scrutiny.
The group’s stronger sales indicate that demand has not disappeared. But the decline in profitability shows how quickly additional revenue can be consumed by rising costs.
For Wetherspoon, the central question is whether continued sales growth can keep pace with the higher cost of employing staff, maintaining properties and operating Britain’s high streets.
The company’s latest trading figures offer some encouragement. But Martin’s warning suggests that the industry believes the margin for absorbing further increases is becoming increasingly narrow.
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