Wetherspoons expansion plans lose their fizz

The pub group is scaling back on expansion as tough trading conditions and high taxes take their toll.

by Elizabeth Anderson
Last Updated: 15 Mar 2013
JD Wetherspoons, which has over 800 pubs in the UK, is scaling back to 40 new openings a year from a previous target of 50.

The group’s pre-tax profits rose 11% to £35.8m in the six months to mid-January, but it was hit with a hefty tax bill. Taxes - which include VAT, corporation tax and other levies - has risen to £250.1m from £225.7m a year ago. Trading has also weakened, as people cut back on spending. Sales slipped 0.7% in the six weeks to 4 March.

Wetherspoons is a regular haunt for students to OAPs because of its cheap grub and special-offer pints. But despite its wide appeal, it’s running into difficulties. The firm’s colourful (and legendary scruffy) chairman and founder Tim Martin told MT last month that he would struggle to reach his goal of operating 1,600 pubs across the UK (opening 50 a year) unless the government cut taxes for the on trade.  The UK has the second highest rate of alcohol excise duty in Europe. Because of the duty escalator, introduced in 2008, taxes on alcohol must rise by a minimum of 2% above inflation each year.

Martin also argues that pubs and restaurants are unfairly treated over VAT, paying 20% on food while supermarkets avoid paying it. ‘That's what makes the economics of going to the pub for customers and of running them for pub companies so expensive and that's what has to be corrected,’ he told MT.

It’s a blow to Martin, who opened his first pub when he was 24 and freely admits he had to learn how to pull a pint on the job. Nearly 30 years later, he’s worth around £150m and has even offered a bar job to his investment hero Warren Buffett when he retires.

Wetherspoons isn’t the only pub chain facing a drought. Pubs are closing at a steady rate of 25 a week, or 1,300 a year, according to the British Beer & Pub Association. A triple whammy of loss-leader supermarket six-packs, stiff competition from bars and restaurants and ever-rising taxes, means drinkers have been abandoning their locals to drink more cheaply at home. It’s no wonder Britain’s pub owners are feeling bitter…

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