THE embattled pubs industry is running hard to stand still amid pressures from reined-in consumer spending and competition from supermarkets, the founder-chairman of JD Wetherspoon has claimed.
Tim Martin said that, since the ban on smoking in pubs and restaurants was introduced in Scotland in 2006 and England the following year, Wetherspoon’s same-floorspace sales had risen 17 per cent but like-for-like profits had been flat.
Unveiling a 6.3 per cent rise in annual pre-tax profits to £77 million, Martin said: “It shows what you have to do to stay just where you are.
“You have to run very, very fast indeed to stay where you were.”
He repeated his belief that supermarkets were competing unfairly against pubs because the beer they sold was not subject to VAT.
The chairman of Wetherspoon, whose 880 pubs include about 40 Scottish outlets, said the group paid £253m in VAT in the year to 28 July, and including other taxes was paying a total of £632,000 per pub.
“The government gets 16p a pint [from the pub industry], but not from supermarkets. We feel the industry itself is under threat. There’s an unjust tax regime.”
Martin revealed that Wetherspoon is to cut its beer prices by 7.5 per cent on Wednesday, 25 September in a so-called “Tax Parity Day” campaign being launched by many pub and restaurant operators. As there are licensing restrictions in Scotland on having drinks promotions for two days or fewer, the company will instead cut the price of all food in ten Wetherspoon pubs in and around Glasgow on the day, aiming to highlight the benefit of a VAT reduction in the hospitality industry.
The pubs taking part include the Counting House in St Vincents Place, the Crystal Palace in Jamaica Street, and the Hengler’s Circus in Sauchiehall Street.
Martin said the company’s operating profit margin dropped to 8.7 per cent in the latest financial year, down from 9 per cent in the previous year and the high water mark of 10.3 per cent when the smoking ban was introduced in England.
Total Wetherspoon sales in the latest financial year lifted 7 per cent to £1.3 billion, while like-for-like sales rose 5.8 per cent. The total dividend is held at 12p.
The group also became the latest in a string of retailers and hospitality groups, including Next, Morrisons and the Argos-owning Home Retail Group, to say Britain’s economic recovery was only modest despite Chancellor George Osborne’s claim that the UK has “turned the corner”.
Martin, whose other Scottish pubs include the West Kirk in Ayr, said: “We don’t see a lot more money circulating. But we don’t feel we are standing on the cliff any more.”
Lord Wolfson, boss of fashion retailer Next, said at the company’s results on Thursday that a true recovery would only happen when wage growth outstripped inflation.
“How can you have a recovery when everyone is getting poorer,” Wolfson said.
Wetherspoon’s staff share in a £28m bonus pot, with 83 per cent going to pub staff, worth about 10 per cent of salary for managers and 5 per cent for hourly-paid workers.