JD Wetherspoon warned on Wednesday Britain’s new higher living wage would threaten the future of many pubs, adding to unsustainable pressure on an industry already struggling with taxes and supermarket competition.
Last week British finance minister George Osborne announced a bumper pay increase in his first post-election budget, with the current 6.50 pound minimum wage set to rise to a living wage for over 25-year-olds of 7.20 pounds from next April.
This will rise steadily over the following four years to around 9.35 pounds an hour.
For Wetherspoon, which spends almost a quarter of its revenue on wages, the impact could be a 21 percent haircut to pretax profits, according to analysts at Morgan Stanley.
Wetherspoon Chairman Tim Martin said the change added “considerable uncertainty to future financial projections in the pub industry” and called on the government to harmonise VAT and business rates for pubs and supermarkets to ease pressure.
The company, which has grown to over 900 pubs on demand for its cheap food and drinks menus, said on Wednesday sales at pubs open over a year had risen 2.9 percent in the 11 weeks to July 12, ahead of 1.7 percent growth recorded in its third quarter.
Total sales, which includes new openings, rose 6.5 percent with its new cut price breakfasts and coffees boosting trade. Its operating margin was 7.0 percent and would be at around 7.4 percent for the full-year, the firm said.
Wetherspoon’s full-year profit is expected to fall below last year’s and the firm said it expected a similar trading performance in its 2015/16 fiscal year.