Pub chain Wetherspoon warns of £40m cost hit as Brexit looms | Business News
J D Wetherspoon has warned its half-year profits will take a hit from at least £40m in additional costs in the run-up to the UK’s expected departure from the EU.
The pub chain’s chairman Tim Martin – a champion of the Brexit cause – also told Sky News it was “bo******” to suggest that the spending slowdown facing the wider high street was linked to consumer caution over Brexit.
He used the company’s second quarter trading update to update investors that a series of cost pressures would combine to hit its bottom line.
He wrote: “Sales growth has been strong since our last update. Costs, as previously indicated, are considerably higher than the previous year, especially labour, which has increased by about £30m in the period, but also in other areas,
including interest, utilities, repairs and depreciation.
“Profit before tax in the first half is expected to be lower than the same period last year. Our expectations for the full year are unchanged.”
Mr Martin later explained that the cumulative impact of the additional charges would take the cost bill to “more than £40m”.
The businessman said: “The fact of the matter is that in the pub world…there are very big cost barriers to overcome”.
He pointed to steep increases in government-imposed costs such as business rates and minimum wage rules, saying that 43% of a pint is now paid in taxes.
There was, he added, the continued VAT disparity between pubs and restaurants versus the supermarket.
The value pub chain reported like for like sales rising 7.2% compared to the same period last year during the first 12 weeks of its second quarter to 20 January.
The figure was 6.3% for the 25 weeks to the same date.
Mr Martin, who is an advocate of leaving the EU without a deal, dismissed the idea that the wider crisis for the high street was a result of Brexit scaring shoppers away.
He added: “People have tightened their belts a bit… Many have been over-indebted so that is probably a good thing.”
He moved to bolster Sports Direct tycoon Mike Ashley’s bid for more help for the high street, suggesting the government could help by reducing the “unsustainably high” tax burden.
“The high street will get by but it needs a rebalancing of taxes.”
As is common for Mr Martin, he also used his update to investors to give his opinion on the state of the Brexit process as uncertainty continues to prevail in Westminster.
He wrote again in support of ‘no-deal’, saying: “The most frequently asked question, regarding the future, relates to the impact of leaving the EU.
“I have argued that the UK – and therefore Wetherspoon – will benefit from a free-trade approach, by avoiding a ‘deal’ which involves the payment of £39bn to the EU, for which the House of Lords has confirmed there is no legal liability.
“This approach also means that the UK, without the agreement of the EU, can end some or all of the protectionist
tariffs and quotas that apply on non-EU imports, including rice, oranges, bananas, coffee, wine, children’s clothes
and over 12,000 other products – many of which are not produced in this country.
“Ending tariffs reduces prices for consumers, without loss of government income, since the proceeds are currently remitted to Brussels.”