Last Wednesday’s budget, which granted £1,000 business rates relief to pubs, is “dwarfed by tax and regulatory increases”, according to Tim Martin, Chairman of JD Wetherspoon.
Chancellor Philip Hammond announced he would provide pubs with a rateable value of less than £100,000 with £1,000 of business rates relief.
But Martin highlighted how this year will bring significantly increased costs which far outweigh any government relief. The pub chain revealed its costs would increase as follows: £7m business rates; £4m electricity taxes; £7m excise duty; £2m apprenticeship levy.
Martin believes that the biggest danger to the pub industry is the continuing tax disparity between supermarkets and pubs, in respect of VAT and business rates.
He commented: “We understand the need for the government to raise taxes. However, there should be a sensible rebalancing of the taxes paid by pubs and supermarkets, if the pub industry is to survive in the long term.
“In effect, this was a budget for dinner parties”
“Companies like Wetherspoon are not eligible for the £1,000 per annum decrease in business rates. The company has previously emphasised the far-higher taxes per meal or per pint that pubs pay compared to supermarkets. For example, supermarkets pay less than 2p per pint for business rates, whereas pubs pay around 18p per pint.”
According to Martin, the budget will weigh far more heavily on pubs than supermarkets, especially since, Martin says, wage costs per pint or meal are approximately 10 times higher in pubs.
“In effect, this was a budget for dinner parties, no doubt the preference of the Chancellor and his predecessor – dinner parties will suffer far less from the taxes outlined above, whereas many people prefer to go to pubs, given the choice,” he said.
Tim Martin predicts that higher costs will lead to lower like-for-like sales in the next six months but as a result of modestly better-than-expected year-to-date sales he anticipates a slightly improved trading outcome compared to its last update.
In the last six weeks to 5th March, like-for-like sales increased by 2.7% and total sales decreased by 0.2%.
This year, JD Wetherspoon intends to increase the level of capital investment in existing pubs from £34m in 2015/6 to around £60m.