Another day, another warning over the cost to big business of the UK Government’s recently announced Budget measures.
Mitchells & Butlers, the pub giant which owns Glasgow’s famous Horseshoe Bar, declared increases in employer national insurance contributions and the national living wage beginning in April will contribute to a £100 million cost hit this year.
The company said today that “by far the most significant increase” in costs for the current financial year will arise from the measures, which were announced by Chancellor Rachel Reeves in Labour’s first Budget since returning to power.
"Looking forward, cost headwinds are now anticipated to increase to c.£100m for FY 2025, representing just over 5% on the cost base," M&Bs told the City today. "Against a generally benign backdrop of general inflation (including food and drink inputs) by far the most significant increase is now expected in relation to labour costs due both to increases in the statutory national living wage and in the recently announced increase in employer national insurance contributions, both of which take place from April 2025.
“We anticipate that energy costs this year, of which just over one half have been bought forward, will broadly stabilise overall with no further deflation as has been seen in FY 2024."
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“Notwithstanding future cost increases we feel that the business is in very good shape. Our balance sheet continues to strengthen, with reduced debt and a substantially de-risked pension surplus, and we expect to outperform the market driving further profit growth in the year ahead.”
M&Bs was the latest in a series of UK-listed companies to set out the impact of the recently announced Budget pressures on the bottom line, following the likes of Marks & Spencer, Halfords, and B&Q owner Kingfisher.
Its update came in a full-year results statement from the hospitality giant, which revealed a strong trading performance for the 52 weeks ended September 28. The company, which has an estate of around 1,700 outlets, trading under brands such as Harvester, O’Neill’s, and All Bar One, made an operating profit of £312 million for the year, up 41.2% on last year. That came amid like-for-like sales growth of 5.3% and revenue up 6.1% to £2.61 billion.
The firm declared its new financial year had started well, with like-for-like sales of 4% in the first seven weeks.
“We are delighted by the very strong performance during the year,” said M&Bs’ chief executive Phil Urban. “Like-for-like sales continued to outperform the market which, coupled with easing inflationary costs and focus on efficiencies, has resulted in very strong profit recovery.
“We face increased inflationary cost headwinds in the year ahead. However, we shall remain focused on our established Ignite programme of initiatives and our successful capital investment programme, to drive further cost efficiencies and increased sales. Coupled with our market-leading estate and customer offers, we are confident that this will enable us to further grow market share and secure continued long-term outperformance.”
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