Wetherspoon says 12.5% VAT will mean 40p increase in meal price

07 July 2021 by
Wetherspoon says 12.5% VAT will mean 40p increase in meal price

JD Wetherspoon has said the interim increase in VAT later this year will mean it will have to increase its food prices by around 40p per meal.

The government temporarily reduced VAT to 5% to support the hospitality industry while it was affected by Covid-19 restrictions. However, from 30 September it is due to increase to 12.5% for six months, returning to 20% in April 2022.

In a trading update, the pub group accused UK governments of "robbing the poor (in this case pubs and restaurants) to help the rich (supermarkets)" and described it as "undoubted unfairness" that supermarkets do not pay VAT on food but pubs and restaurants pay 20%.

As of 4 July, Wetherspoon said 850 of its 860 pubs were open, with most of those still closed located at airports. Like-for-like sales from 17 May to 4 July, when pubs were fully open, were -14.6% in comparison with the pre-pandemic 2019 financial year.

For 17 May to 10 June, like-for-like sales were -8.1%. From 10 June to 4 July, during the UEFA Euro 2020 football tournament, like-for-like sales were -20.8% (although Wetherspoon pubs have generally not televised the matches).

The company had a pipeline of 75 projects, including 18 new pubs and 57 extensions or upgrades to existing pubs across the UK. Once the projects are completed, Wetherspoon plans to invest approximately £750m on a similar range of projects in the following 10 years, which may result in the creation of about 20,000 jobs.

Wetherspoon said it was in a "sound financial position" with net debt of £865m on 4 July 2021, expected to be around £833m at the end of the financial year.

The company has received covenant waivers, up to and including the quarter to July 2021. The normal EBITDA-related covenants have been replaced with a minimum liquidity threshold of £75m. Liquidity was £224m on 4 July 2021 and is expected to be around £253m at the end of the financial year.

Chairman of Wetherspoon Tim Martin said the company expected to continue making a loss for the year ending 25 July 2021.

Photo: Yau Ming Low/Shutterstock.com

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