Pub chain McMullen’s has warned of the strain of tax and regulatory burdens facing the hospitality industry after it reported a surge in labour costs.
The Hertfordshire-based brewery and pub chain, which runs several iconic pubs in central London including the Old Bank of England in Fleet Street and Traitors Gate in Tower Hill, said it had seen an eye-watering 78% increase in labour costs since 2016 amid a string of successive tax rises and double-digit percentage minimum wage hikes. The firm, which has over 1400 staff in London and the East of England, added its employer taxes in managed pubs have gone up by nearly 50% since 2019, while business rates had risen 17% with a further 6.7% increase expected in 2024.
“Labour as a percentage of turnover has increased by nearly five percentage points. These increases, although welcome by the team, will ripple through the business impacting profit, the majority of which would otherwise have been earmarked for reinvestment,” McMullen’s said.
“We remain concerned that the positive impact quality pubs have on the economy and communities continues to be put at risk by the constant squeeze of the increasing legislative and tax burden. The burden is disproportionate to a bricks and mortar business with high labour costs based in the UK. It is fundamental that none of the shareholders, the team or the government takes our guests for granted.”
The concerns add McMullen’s to a growing chorus of hospitality businesses in the UK who have called on the next government to implement urgent reforms to business rates rules after the general election to save hundreds of pubs on the brink of collapse. More than 500 pubs were closed permanently in the UK in 2023, according to data from the British Beer and Pub Association, leading to a loss of more than 6,000 jobs.
The boss of Wetherspoon, Tim Martin has said it “does not make economic sense for the tax system to favour mainly out-of-town supermarkets over mainly high-street pubs,” while Fuller’s CEO Simon Emeny told the Standard: “High streets are being decimated by the online economy. Every conservative manifesto has promised reform of business rates. Don’t put this in the too difficult box again after the election.”
McMullen’s this week reported a 14% rise in turnover in 2023 after sales at its managed pubs business topped £100 million for the first time. Rising costs helped pre-tax profits slip 4.7% to £12.2 million, while its own-brew production rose 1.8% thanks to higher demand in London, but remained 9.1% down on pre-pandemic levels.
