Wetherspoon boss demands cut to VAT as profits slide

Tim Martin, unveiling a near‑6 per cent slide in underlying pre‑tax profits to £66.8 million from £71m in the previous year, claimed that “the biggest danger to the pub industry is the tax disparity between supermarkets and pubs”. He said it put the drinks industry at a “serious competitive disadvantage” and revealed that his company paid £453m – almost half its revenue of £1 billion – in taxes.

Supermarkets paid no VAT on food sales, whereas pubs paid 20 per cent, and the excise tax per pint of beer paid by supermarkets was “far less than that paid by pubs,” Martin said.

“We believe that the current level of tax levied on the pub industry is unsustainable and is directly leading to the closure of many pubs, which have become uncompetitive in relation to neighbouring countries and to supermarkets.”

Martin, whose 40‑plus Scottish pubs include The Playfair in Edinburgh and The Capital Asset in Perth, added: “It would pay the government to reduce VAT levels for pubs and restaurants, as happened in France. It’ll encourage employment and increase tax [revenue].”

He said the increased bills in areas such as utilities and bar and food supplies combined with pressures on consumers’ income had created a tough trading environment.

Like‑for‑like sales in the year to 24 July rose 2.1 per cent, but sales growth fell to 0.4 per cent in the six weeks to 4 September, partly a result of the inner‑city riots that temporarily closed 120 of Wetherspoon’s outlets.

During the year food did better than bar takings, with same‑floorspace food sales up 4.2 per cent, and drinks up 1.7 per cent.

Overall group sales rose 7.6 per cent to £1.07bn from £996.3m, helped by the opening of 50 pubs including The White Lady on the outskirts of Edinburgh, which took the group total to 823.

John Hutson, Wetherspoon’s chief executive, said: “We are pleased to have done it [£1bn sales]. We have been chasing that milestone for a couple of years.”

Hutson said the pub openings had helped create 2,800 jobs in the year, and a similar planned opening programme this year exploiting lower property prices in the downturn would create a similar number of jobs.

Despite the competition from supermarkets, Wetherspoon gave a cool reception to the news that First Minister Alex Salmond’s new administration was to introduce a bill on minimum pricing for alcohol by the end of the year.

“It depends on what the minimum pricing is and how it comes in,” Hutson said. “Government intervention has not always been a positive thing in our industry.

“We are wary about where it could lead to in the long term but it could produce a short‑term boost [to pubs].”

Wetherspoon’s underlying operating profit margins fell to 9.5 per cent from 10 per cent. “It will be difficult to increase profit,” Martin said. “That is the long and short of it, and I think it will be a challenge to hold the operating margin.”

A final dividend of 8p gives a total payment of 12p, compared with a 19p payment in 2010 that included a special divi of 7p.