Weatherspoon blames tax as expansion plans cut

City A.M. Reporter
British pubs operator JD Wetherspoon said it would cut back expansion plans, blaming a harsh tax regime for exacerbating tough trading conditions, and was cautious about prospects for the second half following a decline in sales.

The company, which has over 800 pubs across Britain, said it would scale back new openings to 40 pubs this year from a target of 50 previously and review its longer term plans for expansion over the next few months.

"The main challenges for the company in this financial year will be the continuing cost pressures resulting from government legislation, including further increases to excise duty, business rates and carbon tax," Chairman and founder Tim Martin said in a statement on Friday.

Martin said in January that Wetherspoon was considering slowing its expansion.

British pubs pay the second highest rate of excise duty in Europe. Under the duty escalator, which was introduced by the last Labour government in 2008, taxes on alcohol must rise by a minimum of two per cent above inflation each year.

Wetherspoon has traditionally been known for its value-for-money focus, with offers such as a beer and burger for under 5 pounds proving popular with cash-strapped customers.

However, rising costs have led to price rises for both food and drink and some analysts say Wetherspoon's price-sensitive customers are opting to drink at home instead.

The company reported an 11.1 per cent increase in pre-tax profit to £35.8m in the six months to 22 January. Sales at pubs open more than a year were up 2.1 per cent.

However, trading has deteriorated in the second half with like-for-like sales down 0.7 per cent in the six weeks to 4 March.