The owner of Harvester, Toby Carvery and All Bar One, Mitchells & Butlers, has become the latest hospitality business to warn it will take a £100m hit as a result of the tax changes outlined in the October budget.
The pub and restaurant group said it was facing “cost headwinds” in its current financial year, which began at the start of October, because of the increases in the national minimum wage and employer national insurance contributions (NICs) announced by Rachel Reeves, which are due to take effect from next April.
The company said these measures, which would result in wages rising “sharply”, would account for the most “significant increase” to its costs, adding an extra 5% to current levels, it said.
This comes as its general costs are calming after a period of high inflation, while pandemic-related disruptions have eased. The group said input costs for food and drink prices had cooled and its energy costs had stabilised.
Phil Urban, Mitchells & Butlers chief executive, said: “We face increased inflationary cost headwinds in the year ahead.” He said the company would look to keep down its costs and drive sales over the coming year.
The group, which also operates chains including O’Neill’s, Stonehouse and Sizzling Pubs, reported a statutory pre-tax profit of £199m for the 12 months to 28 September, compared with a loss of £13m a year earlier. Like-for-like sales were 5.3% higher compared with a year earlier.
Mitchells & Butlers said it was benefiting from continued sales growth as inflation cooled, and it expected to outperform the market over the coming year. It said the rate of underlying like-for-like sales growth was 4% over the past seven weeks, since the start of October.
The group told investors that despite the future cost increases, it considered the business to be “in very good shape” as it had reduced its debt and strengthened its balance sheet.
It comes after Mitchells & Butlers and other hospitality businesses have come under pressure from the post-pandemic increase in inflation, as they were hit by rising costs in food supply chains, energy and labour that reduced their profit margins.
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The group said the resulting “widespread and unavoidable increase in prices” made consumers reassess whether they could afford to eat out.
However, Mitchells & Butlers said it had “positive indications” of households having more disposable income in recent months, as inflationary pressures had eased, leading them to forecast growing sales at its managed pubs, bars and restaurants, with consumers expected to spend more per head.