Shares in pub chain plummet by 10pc

SHARES in pubs giant JD Wetherspoon fell almost 10pc as it warned that paying the new National Living Wage would hit its profits.

Wetherspoon, known as ‘Spoons’ to regulars, spends almost a quarter of its revenue on wages and has been a vocal opponent of plans by Chancellor George Osborne to raise the minimum wage.

Last year Osborne announced the £6.50 minimum wage would rise to a £7.20 an hour by April for those aged over 25.

Chairman Tim Martin used a second quarter update to warn annual profit would be towards the lower end of analysts’ expectations due to higher labour costs.

Wetherspoon, which has over 900 pubs, has been squeezed in the middle from rising costs but has been unable to hike prices because of fierce competition from grocers offering cheap supermarket booze.

The shares fell 65.5p to 609p as Martin said: ‘Sales have improved in the second quarter so far. However, as indicated in our November trading update, increased labour costs will be an important factor in the outcome for this financial year.’

Martin said festive sales for the 12 weeks to January 17 increased by 3.3pc.

However profit margins, the difference between the price it buys and sells products, will fall to 6.3pc for the half year to January 24. This is 1.1pc lower than the same period last year.

The main reasons are the higher wages, competition from rivals and the cost of investing in improvements.