The boss of JD Wetherspoon launched a fresh attack on ministers over living wage and tax policies as the pub company reported a 25 per cent fall in profits.
Chairman Tim Martin claims that pubs are under unfair pressure from the way they are charged VAT compared with supermarkets and that the introduction of the living wage will intensify the squeeze on them at a time when many are closing.
Mr Martin claimed the new pay rules had been decided “by one or two politicians on a whim, for political reasons”.
It comes a day after retailer Next became the latest company to set out how it would be affected by the living wage policy, saying the cost of implementing it could rise to £27m a year resulting in higher prices for consumers.
Mr Martin spoke out as JD Wetherspoon reported a slump in pre-tax profits to £58.7m for the 52 weeks to July 26, despite a rise in like-for-like sales of 3.3 per cent. Bar sales grew 1.2 per cent with food up 7.3 per cent and slot and fruit machine revenue down 2.8 per cent.
The group’s bottom line was weighed down by one-off items including an £11.2m write-down on the value of under-performing pubs. But stripping these out profits were still down two per cent to £77.8m, partly due to higher wage costs.
Mr Martin has long campaigned about the disparity between pubs being charged 20 per cent VAT on food sales while supermarkets are charged nothing, saying this allows the big grocers to subsidise alcohol sales. He says it is the biggest danger to the pub industry.
He has now also voiced alarm over the new national living wage, which will see over-25s paid a minimum of £7.20 an hour from April next year rising to £9 by 2002 - claiming again that this will weigh more heavily on pubs than on supermarkets.
That is because 85p of a typical pint costing £3.50 go on wages where a pint bought at a supermarket for £1 only represents 10p of wages, he said. Wetherspoon employs nearly 35,000 people.
Mr Martin said Wetherspoon had already hiked its minimum hourly rate by five per cent last October and a further eight per cent in July and that it pays about 40 per cent of profits - £30.7m in the current year - as a bonus or free shares, mainly to those working in pubs.
He said: “By pushing up the cost of wages by a large factor, the Government is inevitably putting financial pressure on pubs, many of which have already closed.
“This financial pressure will be felt most strongly in areas which are less affluent, since the price differential in those areas between pubs and supermarkets is far more important to customers.
“It is certain that high streets in less affluent areas, which already suffer from serious problems of empty shops and dereliction, will suffer further if pubs and other labour-intensive businesses close.”
JD Wetherspoon, which operates Wetherspoon pubs as well as Lloyds No.1 bars, opened 30 pubs in the financial year and closed or sold six taking the total to 951. It plans to open 15 to 20 in the year to July 2016.
The group said like-for-like sales in the six weeks to September 6 rose 1.4 per cent.
For the current year it expects to benefit from opening more pubs, a better economy and low interest rates but face a drag from competition with supermarkets and restaurant groups as well as higher staff, repair, bar and food costs.
Wetherspoon said it expected a trading performance similar to or slightly above that achieved in 2014/15.
Analysts at N+1 Singer said annual results were “a smidgen below” consensus forecasts and a slow start to the current year reinforced fears about overcapacity and heightened competition.