Pub chains are sounding the alarm over a projected six per cent jump in prices due to the Budget, a hike that could tack on an extra 30p to your pint. The stock market is feeling the tremors with pub group shares taking a dive as the sector grapples with the “staggering extra costs” triggered by recent government decisions.
With new budgetary changes like a boost in the minimum wage and upticks in job-related taxes, employing full-time staff is set to become pricier by a minimum of £2,500 annually, per calculations from UKHospitality. This estimate accounts for a full-time worker aged 21 plus earning the National Living Wage (NLW), clocking in 38 hours each week, and includes employer National Insurance Contributions (NICs) spiking from £1,863 to £2,869 — a whopping 53.9 percent increase.
UKHospitality’s chief Kate Nicholls spotlighted the fiscal pressure points, pointing out such surges could lead to a six percent rise in customer costs. She admitted the sector would strive to circumvent these increases, but applied to the average beer price, this could drive a pint from £4.98 up to £5.28.
Ms Nicholls said: “The increase to employer NICs and, crucially, the lowering of the threshold left hospitality owners with a sleepless night as they came to terms with the enormous cost they will have to bear from April onwards. The new cost of employing core members of staff is eye watering – an increase of at least £2,500 is far, far beyond what anyone’s worst-case scenario was.
“Hospitality is at the heart of our communities but the enormous value it delivers both socially and economically is under threat.”
The Institute for Fiscal Studies has highlighted that businesses employing National Living Wage workers will feel the pinch the most, with hospitality, which employs approximately 3.5 million individuals, set to experience a considerable impact. The aftermath of the budget is expected to have ripple effects across the industry, influencing decisions concerning staff, pricing, and investments.
Andrew Bewes, MD of Hallgarten and Novum Wines, commented on the recent Budget announcement’s significance, saying: “The enormity of this week’s Budget statement will not be lost on anybody in the trade.”
He pointed out that the combination of wage increases and tax hikes is creating a “perfect storm” of inflationary pressures that will inevitably hit both enterprises and patrons. Following these developments, JD Wetherspoon’s shares plunged 11.4 percent, and Marston’s stock dropped 10.7 percent, as the sector reeled from an uptick in employers’ national insurance contributions and a marked rise in the minimum wage.
Fuller, Smith and Turner along with Mitchells and Butlers saw their shares fall by over six percent. Chris Jowsey, Admiral Taverns’ CEO, spoke about how higher staffing costs coupled with the cutback in business rates relief from 75 percent to 40 percent come April will bite into future profits and could make approving some investments tougher.
Simon Dodd, chief executive of Aim-listed pub chain Young’s, which managed to avoid a drop in share price, expressed his concerns to the Financial Times: “A double whammy of national living wage on top of the national insurance employer contribution is a very large cost to swallow for the sector. We want to talk about growth but we’re now at a stage where we’re talking about ‘what can we do to survive? ‘”.
Despite the Chancellor announcing a cut of one penny on a pint sold on draught in pubs during Wednesday’s Budget, industry experts fear that this small concession will be overshadowed by the burden of other financial measures. Reeves declared “a penny off the pint in the pub” as she reduced duty on draught beer, yet pub owners argue that the benefit of this cut is minimal compared to the effects of her additional policies.
The British Beer and Pub Association has voiced its alarm over the “staggering extra costs” anticipated to reach £500 million, warning that such expenses could stifle growth and investment, putting jobs at risk.