Tim Martin, the founder and chairman of the JD Wetherspoon chain, said George Osborne’s plan to introduce the mandatory pay rate of £7.20 an hour from next April would help widen “the financial disparity between pubs and supermarkets”, and “threaten the future of many more pubs”.
He said: “The recent government announcement regarding the ‘living wage’ adds considerable uncertainty to future financial projections in the pub industry. The average price of a pint in a supermarket is less than £1 and we estimate staff costs to be around 10% or 10p. In contrast, a pint in a pub costs around £3 and staff costs are about 25% or 75p. Increased labour costs therefore affect pubs with far greater force than supermarkets.
“This disadvantage is compounded by a huge VAT and business-rates disparity between pubs and supermarkets, which is putting unsustainable pressure on many pubs in our industry, especially in smaller towns and less-affluent areas”.
Wetherspoon has sales of £1.4bn a year and staff costs of around £400m. Applying that ratio to a £3 beer suggests that staff costs equate to 73p of the cost of that pint, after correcting for VAT.
However, a sizeable portion of the staff costs are in the group’s head office, with Nigel Parson, an analyst at Canaccord Genuity, estimating that around 60% of Wetherspoon’s wages are paid to employees serving in its pubs. That would mean that the cost of Wetherspoon’s bar staff pulling a pint is about 43p.
In a final flourish to the first Conservative-only budget in 19 years, Osborne last week attempted to portray the Tories as the party of working people by declaring that the living wage will be introduced from next April at a rate of £7.20 an hour for people aged 25 and over, rising to £9 by 2020.
Campaigners for the living wage said the chancellor’s announcement merely amounted to an increase in the minimum wage, and that the accompanying curbs on tax credits would hit low-paid workers in other ways.
Martin added that before the chancellor’s budget, the pub group had announced a 5% minimum starting-pay increase in October, plus an 8% increase for 3 August this year, while the company also pays “approximately one third of profits to staff in bonuses and free shares and 80% of this is paid to staff who work in our pubs”.
Although average Wetherspoon bar-staff pay will be £7.32 an hour after next month’s pay rise, the starting rate will be £6.89, meaning some staff who are 25 and over could be due a significant rise in April.
The latest comments by the outspoken publican, who has long been a critic of what he sees as the tax disparity between supermarkets and pubs, came as the company updated the City on its current trading.
In the 11 weeks to 12 July, like-for-like sales increased by 2.9% and total sales increased by 6.5%. In the 50 weeks of the financial year to date, like-for-like sales increased by 3.4% and total sales increased by 7.6%.
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