Wetherspoon Faces £60 Million Tax Blow Despite Climbing Sales

JD Wetherspoon, the UK’s largest pub group, faces a stark financial challenge in the months ahead despite delivering solid sales growth and ongoing expansion. Chairman Tim Martin has sounded the alarm over an expected £60 million rise in annual labour costs following the latest government Budget, which includes increases in the national minimum wage and employer national insurance contributions.

Although like-for-like sales rose by 5% in the seven weeks leading up to 16 March 2025, Martin warned that these fiscal changes will add approximately £1,500 weekly costs for each Wetherspoon pub. With the national minimum wage set to rise on 1 April and changes to national insurance thresholds following days later, the timing of these new obligations presents a significant headwind for the hospitality sector.

“Labour costs account for around 35% of sales in the pub industry, compared to just 11% for supermarkets,” Martin stated. “Increases of this nature inevitably have a disproportionate impact on pubs, exacerbating the already-wide price differential for customers between the on- and off-trade.”

The long-standing disparity in VAT treatment between pubs and supermarkets remains a sore point for the Wetherspoon chief. Hospitality venues pay 20% VAT on food sales, while supermarkets are exempt from this levy — a point Martin believes further undermines the competitiveness of on-trade businesses.

Despite these financial pressures, Wetherspoon reported a pre-tax profit of £32.9 million for the period, and the company remains intent on expansion. The group continues to explore the franchise model, following a £6.7 million investment from Haven Holiday Parks. Three franchise sites have already been launched — including partnerships at Hull and Newcastle Universities and Haven’s Primrose Valley Holiday Park — with five more expected by the end of the financial year.

The company’s estate now stands at 796 pubs after selling six sites and opening two new venues. Slot and fruit machines have also proved to be a lucrative revenue stream, delivering an expected 11% boost in sales.

Nevertheless, the broader message from Wetherspoon is one of caution. In response to possible future changes to licensing laws — including reduced operating hours for pubs — the company warned this would drive more consumers toward unregulated environments and off-trade drinking.

“The term ‘pub’ may carry outdated connotations,” the group noted. “Our best-selling draught product is Pepsi, and coffee and tea sales are double that. The reality is that pubs have transformed significantly over recent decades.”

Analysts suggest that Wetherspoon could benefit from the coming financial squeeze on smaller competitors. According to a report from Jefferies Investment Bank, the firm’s scale and consistent operating model may allow it to capture more significant market share as independents struggle to absorb the new tax burden.

Yet Martin remains clear-eyed about the pressures the industry faces. He has previously warned that most hospitality businesses will have no choice but to raise prices in response to the cost hikes brought on by the Budget. This outcome may further shift consumer habits and widen the divide between pubs and the off-trade.