By Yamini Kalia
(Reuters) -British pub chain JD Wetherspoon reported a slowdown in recent sales growth on Wednesday and warned of a heavy blow to the industry if the government repeats last year’s mix of tax increases and higher wage costs in this month’s budget.
The comments underscore the challenges facing Britain’s hospitality sector, with even value-focused players like Wetherspoons struggling to draw in customers amid cost-of-living pressures.
UK finance minister Rachel Reeves is expected to announce sweeping tax hikes in her November 26 budget to keep control of public finances, likely breaking last year’s pledge not to repeat her revenue-raising measures.
“We’re on the lookout for any increases in taxes, however disguised,” Wetherspoons chair Tim Martin told Reuters, as the company adopted a more cautious outlook for the year.
Recent increases in non-commodity energy costs are expected to cost Wetherspoons 7 million pounds ($9.4 million) this year.
A 10% wage hike would raise the cost of a pint by about 15 pence in pubs compared to just 1.5 pence in supermarkets, Martin said, arguing that rising costs are widening the price gap and frustrating customers.
The pub group, known colloquially as Spoons, has made targeted investments such as gardens and outdoor seating for customers to draw in customers.
Wetherspoons shares were down 1.2% at 634 pence by 1305 GMT.
Analysts are particularly wary of Wetherspoons’ exposure to labour costs and gaming machine duties, with staff wages accounting for about 40% of its sales, according to Peel Hunt analysts, and its high-margin gaming machines providing a buffer against other cost pressures.
The government has acknowledged the pressure on the hospitality industry “so we hope they’ll leave pub gaming machines alone,” Martin said.
The company, which runs more than 800 pubs in the UK and Ireland, reported a 3.7% rise in like-for-like sales in the 14 weeks to November 2, driven by bar sales and sales from gaming machines.
That was down from 5.1% growth in the previous 12 weeks.
($1 = 0.7451 pounds)
(Reporting by Yamini Kalia in Bengaluru.
Editing by Sherry Jacob-Phillips, Mark Potter and Conor Humphries)
