Mitchells & Butlers Faces £130m Cost Increase Amid Wage and Tax Changes
Mitchells & Butlers, the operator behind popular pub and restaurant chains including All Bar One, Toby Carvery, Harvester, and Miller & Carter, has announced it expects to face approximately £130 million in additional costs during the coming financial year.
The Birmingham-based hospitality group attributes the substantial cost increase primarily to employment-related expenses, particularly changes to national insurance contributions and statutory minimum wage rates that took effect in April. A further minimum wage increase exceeding inflation has also been confirmed for the current year.
Rising food costs represent another significant challenge for the business, with the company highlighting particular concerns about increases in meat prices.
The projected £130 million figure encompasses the company’s initial evaluation of impacts stemming from measures announced in the recent autumn Budget, though specific details of these Budget-related effects were not disclosed.
Government ministers confirmed this week that the national minimum wage will rise by a further 4.1% from April onwards.
The hospitality sector received unwelcome news regarding business rates in the recent Budget announcement. An existing 40% relief for retail, hospitality and leisure operators, which had been capped at £110,000 per business, will cease on 31 March.
A replacement scheme will commence from the following financial year, featuring rates multipliers set 5p below the standard rate for qualifying businesses, but without any cap on the level of support available.
Industry analysts have suggested that when combined with increases to rateable values affecting most licensed premises, the changes are likely to result in significantly higher annual bills for many operators.
Phil Urban, chief executive of Mitchells & Butlers, acknowledged the challenges ahead whilst expressing confidence in the company’s response strategy.
“We anticipate increased cost pressures across the sector as we look to the year ahead,” Urban stated. “However, we remain confident in our ability to manage these challenges through our established Ignite improvement programme and disciplined capital investment strategy.”
The warnings about future costs came alongside the publication of annual results showing pre-tax profits increased by 20% to £238 million for the year ending 27 September. This performance was achieved despite the business absorbing £100 million in additional wage-related costs from April’s changes.
Like-for-like sales advanced by 4.3% across the full year, though momentum slowed to 3.2% in the final quarter. The company attributed the deceleration to softer trading performance in London and surrounding areas, as well as in its premium brand portfolio.
For the opening eight weeks of the new financial year, sales growth has registered at 3.8%.
To counter rising cost pressures, Mitchells & Butlers has implemented various operational improvements. These include deploying labour scheduling systems, introducing automated ordering processes to optimise stock levels and reduce waste, and rolling out energy conservation initiatives across the estate.
The company operates approximately 1,700 sites across the UK, making it one of the country’s largest managed pub and restaurant operators.