Wetherspoons warns of meal price hike under VAT rules

JD Wetherspoon has criticised the UK Government for “Monty Python” VAT rules which it said will bolster supermarkets instead of the hospitality sector.

The pub chain said it will have to increase the price of its meals when a recent reduction in the VAT on its food is phased out.

Hot food served in pubs and restaurants typically has a VAT rate of 20%, although this has been reduced to 5% during the pandemic.

Wetherspoons said plans to return VAT levels for hospitality food to previous levels shows “unfairness” compared with retail, where there is largely no VAT.

“The interim rise to VAT of 12%, in September 2021, will result in Wetherspoon having to increase food prices by around 40 pence per meal,” the company said.

“The VAT rise will make the entire hospitality industry less competitive vis a vis powerful supermarkets.

“For many years, UK governments have therefore behaved like Monty Python’s Dennis Moore – who robbed the poor (in this case pubs and restaurants) to help the rich (supermarkets).

“Treating the same product, food, the same way for tax purposes makes economic sense.”

It came as Wetherspoons said it expects to tumble to a loss for the current financial year after sales since reopening slipped below pre-pandemic levels.

The pub giant has now reopened 850 of its estate of 860 sites, with the remaining outlets mainly at airports.

It said like-for-like sales from May 17, when hospitality venues were able to reopen indoors, to July 4 declined by 14.6% against the same period last year.

The chain told shareholders that this sales decline has accelerated while the Euro 2020 tournament has been on.

Wetherspoons said sales since June 10, when the football tournament started, have fallen by more than a fifth, with the group’s pubs not televising games apart from a limited number of exceptions.

The group also revealed that like-for-like bar and food sales from April 12 to May 17, when sites were only able to reopen outside, declined by 49% against the same period in 2019.

The company added: “Trading has been helped by the addition of outside seating.

“Landlords, landowners, and local and licensing authorities have been extremely flexible in accommodating extra outside space – which has helped Wetherspoon and the licensed trade generally.”

Wetherspoons said it has opened two new pubs in the past six months and now has an investment pipeline which includes 18 new sites.

Chairman and founder Tim Martin said: “The company continues to expect to make a loss for the year ending July 25.

“In a trading update of January 19, the company’s principal ‘scenario’ estimated sales in the financial year starting July 26 to be in line with financial year 2019, which remains our current best estimate, on the basis that restrictions are ended, as the Government currently intends.”