JD Wetherspoon boss Tim Martin, has warned that the Budget’s moves to increase the minimum wage and employment taxes will lead to higher prices in pubs across the nation. He highlighted that the business is bracing for a £60 million surge in taxes and operational costs, including a significant 67 percent rise in National Insurance contributions due to policies by Rachel Reeves.
Mr Martin 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.”
The industry is facing a potential 6 percent price hike due to the Budget, which could add around 30p to a pint, pushing the UK average price over £5. Following these announcements, shares in pub groups have taken a hit as the market reacts to the “staggering extra costs” that the sector is expected to incur.
The Autumn Budget’s measures, such as the increased minimum wage and higher job taxes, are set to raise the cost of employing full-time staff by at least £2,500 annually. This analysis from UKHospitality takes into account a full-time worker aged 21 or above on the National Living Wage (NLW), working 38 hours per week, with employer National Insurance Contributions (NICs) soaring from £1,863 to £2,869 – a jump of 53.9 percent.
The budget’s ramifications are set to ripple across the industry, influencing key business decisions on staffing, pricing, and investment. For instance, Fuller’s pub chain has announced that due to escalating costs, its annual investment might be slashed from £60 million to £30 million.
Similarly, Young’s has indicated it may have to make comparable cutbacks. Other high street entities, including supermarkets and Primark, have cautioned that hikes in National Insurance and other taxes will likely lead to increased prices soon as these costs are passed onto consumers instead of absorbing them into profit margins.
Last week, Rachel Reeves unveiled her inaugural Budget, asserting it honoured the Government’s pledge not to raise taxes for “working people”. However, she introduced an additional £40 billion per year in taxes to enhance funding for schools, hospitals, transport, and housing.
This includes a proposal to hike employer National Insurance rates from April next year, expected to generate £25.7 billion by 2029-2030. On Tuesday, the CEO of Primark’s parent company expressed concern that the Budget’s tax increases disproportionately burden the UK high street, revealing that Primark’s National Insurance bill would surge by “tens of millions” of pounds.
JD Wetherspoon, which recorded a pre-tax profit of £74m in the last complete financial year ending on 28 July, has projected that its tax and business expenses will increase by £60m in the calendar year 2025 due to the budgetary measures.
Currently, the chain of 797 pubs and over 50 hotels continues to excel in a sector that has been grappling with recovery from widespread enforced closures during the Covid-19 pandemic, followed by the cost of living crisis. Adjusting for the impact of pub disposals, like-for-like sales in the first 14 weeks of its new financial year increased by 5.9 percent.
This propelled sales to a record 14-week high, although the company did not disclose a sales figure. Total sales saw an increase of 4.6 percent.