UK living wage could force pub closures

Pub bosses have warned that the UK government’s plans to introduce a national living wage could force pub closures and job losses.

George Osborne announced his 2015 Budget last week

George Osborne announced last week plans to introduce a compulsory minimum wage for workers aged 25 and over, raising it from £6.50 an hour to £7.20 next April, with plans to raise it further to £9 by 2020.

While workers have welcomed the measure, it has been met with trepidation from the hospitality industry, including the pub sector, who claim it will put additional pressure on an already struggling industry.

Simon Emeny, the chief executive of Fuller, Smith & Turner, said the measure would lead to wage inflation, higher prices and ultimately more pub closures, speaking to The Telegraph.

“We’ve made such efforts to develop our training programmes with our staff so that the most highly motivated can develop a career with us and get rewarded proportionally. If we’ve got to put the basic pay rate up it will cause inflationary pressure and will remove that level of incentivisation and motivation that some of our staff thrive on.”

His sentiments were echoed by Tim Martin, chairman of UK pub chain JD Wetherspoon, who argued the living wage would add “considerable uncertainty to future financial projections in the pub industry”.

He has described the introduction of the living wage as a “capricious initiative” by the government that will widen the “financial disparity between pubs and supermarkets” and threaten the future of many pubs.

“The average price of a pint in a supermarket is less than £1 and we estimate staff costs to be around 10pc, or 10p. In contrast, a pint in a pub costs around £3 and staff costs are about 25pc, or 75p”, he said. “Increased labour costs therefore affect pubs with far greater force than supermarkets. This disadvantage is compounded by a huge VAT and business rates disparity between pubs and supermarkets.”

While other tax cuts for businesses were announced alongside the Budget that will go some way to offsetting some of its impact small pubs, which are closing at a rate of 29 per week according to CAMRA, are expected to be hit hardest.

Brigid Simmonds, chief executive of the British Beer & Pub Association, said: “There are some very welcome measures for beer and pub businesses, with the cut in Corporation Tax, reductions in the cost of Employers National Insurance, and the rise in the Annual Investment Allowance. Some of the measures, such as the Living Wage and reductions in tax credits, will have a knock-on effect on the cost of employment for pubs, so the tax cuts announced today are a welcome and necessary balancing measure.”