Wetherspoon hits out at tax burden19th January, 2012 by Gabriel Savage
UK pub chain JD Wetherspoon has threatened to scale back expansion plans, blaming the government for rising costs, which place an unfair burden on the pub industry.
In a trading update during the run up to its half year results, the company said: “We expect the operating margin for the half year ending 22 January 2012 to be slightly below that achieved in the first quarter of this financial year, with the potential for further decline in the second half of this financial year due to continuing cost increases.”
The current financial year has so far seen Wetherspoon, which currently operates 834 pubs, open 18 new venues and close two.
However, the company said it still remained on target to bring that total up to 50, the same number it has opened annually for the past three years as part of a long-term plan to grow to 1,600 pubs.
However, speaking to Reuters last week, Wetherspoon’s chief executive Tim Martin warned that concerns over the tax burden on pubs means that the company “will have to take a look” at whether to maintain its current rate of expansion.
With alcohol duty continuing to rise by two percent above inflation, Martin, a vocal opponent of the duty escalator, predicted that the March budget would drive up the price of a pint by 20 pence.
His views were reflected in Wetherspoon’s trading update, which stated: “The main challenges for the Company, in this financial year of 53 trading weeks, will be the continuing cost pressures resulting from government legislation, including further increases to excise duty, business rates and carbon tax.
“In addition, as previously stated, pubs pay VAT on food, whereas supermarkets do not, and also pay far higher rates of VAT than similar businesses in Ireland and France, for example.
“In order to maximise job creation and taxation revenues, we believe the government needs to reduce VAT for pubs and restaurants as a priority.”
Wetherspoon is expected to announce its interim results in March.