Moves in the Budget to boost the minimum wage and employment taxes will push up prices in the nation’s pubs, according to the boss of J D Wetherspoon. Tim Martin said that the business faces a £60 million hit through increases in taxes and business costs, which will include a 67 percent rise in National Insurance contributions due to decisions by Rachel Reeves.
He said: “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.
“All hospitality businesses, we believe, plan to increase prices, as a result. Wetherspoon will, as always, make every attempt to stay as competitive as possible.”
Pub giants are warning of a 6 percent rise in prices driven by the Budget which could, potentially add 30p to the price of a pint taking the UK average well above £5.
Shares in pub groups have plunged in recent days as investors took account of the “staggering extra costs” faced by the industry. The Autumn Budget’s measures including a rise in the minimum wage and increases in jobs taxes will raise the cost of employing full-time staff by at least £2,500 a year, according to an analysis released by industry trade body UKHospitality.
The increase, which is based on a full-time worker aged 21 or over earning the National Living Wage (NLW) and working 38 hours weekly, includes a rise in employer National Insurance Contributions (NICs) from £1,863 to £2,869, marking a 53.9 percent hike.
The budget’s impact is predicted to be felt throughout the industry and is expected to influence business decisions over staffing, pricing and investment.
For example, the Fuller’s pub chain has declared that rising costs could see its annual investment halved from £60 million to £30 million, while Young’s has also declared it may be forced to follow suit.
Other high street businesses, including supermarkets and Primark, have also warned that increases in NI and other taxes will likely lead to higher prices in the coming months as they are passed on to shoppers rather than taking the hit themselves by reducing profits.
Last week Rachel Reeves presented her first Budget, which she said met the Government’s promise not to increase taxes for “working people”. But she introduced £40 billion a year in extra taxes to put more money into schools, hospitals, transport and houses.
This included plans to increase the rate of employer national insurance from April next year, which would raise £25.7 billion by 2029 to 2030.
On Tuesday, the chief executive of Primark’s parent company said he felt “the weight of tax rises” in the Budget were falling on the UK high street, as he said the company’s national insurance bill would rise by “tens of millions” of pounds.
JD Wetherspoon, which reported a pre-tax profit of £74m in the last full financial year, ending on 28 July, said its tax and business costs would rise by £60m in the 2025 calendar year as a result of the budget measures.
For now, the chain of 797 pubs and more than 50 hotels continues to outperform a sector that has struggled to recover from mass enforced closures during the Covid-19 pandemic, followed by the cost of living crisis.
Like-for-like sales in the first 14 weeks of its new financial year rose by 5.9 percent, adjusting for the impact of pub disposals. This drove sales to a record 14-week high, although the company did not provide a sales figure. Total sales were up by 4.6 percent.