The boss of pub chain JD Wetherspoon has launched a scathing attack against the government over the new national living wage.
As the pub firm announced a 25% slump in profits, Wetherspoon chairman Tim Martin said the national living wage is being introduced "on a whim, for political reasons".
From April 2016, businesses in the UK will have to pay over 25 year-olds at least £7.20, rising to £9.35 by 2020.
JD Wetherspoon has already criticised the way it, and other pub firms, are charged VAT in comparison with supermarkets. With many pubs already struggling to stay afloat, Mr Martin said the new national living wage will add a further squeeze.
“By pushing up the cost of wages by a large factor, the government is inevitably putting financial pressure on pubs, many of which have already closed," he said.
“This financial pressure will be felt most strongly in areas which are less affluent, since the price differential in those areas between pubs and supermarkets is far 7.3%more important to customers.
“It is certain that high streets in less affluent areas, which already suffer from serious problems of empty shops and dereliction, will suffer further if pubs and other labour-intensive businesses close.”
Having argued against VAT differences between pubs and supermarkets, the Wetherspoon also claimed that the national living wage will affect pubs more than supermarkets as well. Typically, 85p of a £3.50 pint bought in a pub goes on staff wages. Whereas 10p from every £1 pint bought at a supermarket goes towards wages.
It appears the looming national living wage is coming as a tough time for JD Wetherspoon. The pub chain reported profits of £58.7 million for its financial year. But that was largely down to an £11.2m write-down on the value of under-performing pubs. Like-for-like sales, which exclude new pubs, were up 3.3% with bar sales rising 1.2% and food 7.3%.
Even if one-off costs were not taken into account, Wetherspoon still would've reported a 2% fall in profits. That is largely due to higher wage costs. The company raised its minimum wage by 5% in July, and by another 8% in October. It also said that around 40% of its profits go on bonuses or free shares for pub staff.