The boss of the pub chain Wetherspoon’s has vowed to keep price increases to a “minimum”, after blaming a beefed-up packaging tax and rising energy bills for extra costs.
Tim Martin said the recently introduced “extended producer responsibility” levy on packaging would lead to the company’s costs from the tax tripling from £800,000 to £2.4m a year.
He said suppliers were passing on the levy they were paying on packaging – including bottles and cans – to the pub chain.
Martin also criticised the impact of what he termed “non-commodity” energy costs – taxes or levies added to the pub chain’s bills for the electricity it uses – which he said would add £7m a year from this month.
He said the increase in energy costs was partly because of a “levy” to drive the construction of nuclear power stations and a “subsidy” for “energy-intensive industries”.
Earlier this week, the consultancy Cornwall Insight said the expected introduction of the nuclear regulated asset base (RAB) levy to support the building of new stations would add just under £10 a year to consumers’ bills from the first quarter of next year.
This includes an adjustment to cover November and December, when suppliers will have started paying the levy but not recovered costs from customers.
“This substantial increase in levies, applicable to most consumers and businesses, will inevitably add to inflation in the coming months,” Martin said. “Wetherspoon’s, as always, will endeavour to keep price increases to a minimum.”
He added that the “non-commodity” costs would account for 62% of Wetherspoon’s overall electricity costs.
Martin reiterated that the company, which operates 794 pubs, has already been hit by a £60m annual cost increase because of the increases in employers’ national insurance contributions (NICs) and the minimum wage.
Earlier this week, the boss of the pub chain Shepherd Neame also criticised the government for increases in costs driven by NICs, the minimum wage and the packaging levy.
The Shepherd Neame chief executive, Jonathan Neame, called on the government to stop “throwing roadblocks” in front of the hospitality industry, adding that “bad policy decisions” were “sucking cash” out of the sector.
Martin’s comments came as the chain’s owner, JD Wetherspoon, reported a 5.1% annual increase in sales at established pubs, to £2.1bn for the year to 27 July. The company reported a 10.1% increase in pre-tax profits, to £81.4m.
“The company currently anticipates a reasonable outcome for the financial year,” Martin said. “Although government-led cost increases in areas such as energy may have a bearing on the outcome.”
after newsletter promotion
Businesses have repeatedly called on the chancellor, Rachel Reeves, not to increase taxes on businesses in her budget on 26 November.
However, shares in JD Wetherspoon fell more than 5% in early trading as investors reacted to a slowdown in sales at the start of its new financial year.
The company said that comparable sales – those at pubs open for more than a year – grew 3.7% in the nine weeks to 28 September, ahead of peers, but slower than the annual rate of 5.1% reported for its last financial year.
“In terms of outlook there is limited reason for cheer,” said Richard Hunter, the head of markets at Interactive Investor.
Hunter added that, while Wetherspoon’s revenues had recovered and climbed 17% higher than pre-pandemic levels with sales per pub up 29%, the company’s profits were being hit by increased costs.
“In terms of profit, that progress has largely been obliterated by growth of 57.8% and 34.5% in energy and wage costs respectively [compared with pre-pandemic],” Hunter said.
“At the same time, the economic backdrop in the UK provides little scope for optimism. The group will be mindful that prospects for the UK economy are currently tepid at best, which could yet result in the consumer choosing to stay at home rather than venture out as the more challenging financial times bite.”
