JD Wetherspoon’s sales have fallen by almost a fifth since the reopening of its chain of pubs last month and the company warned it will report a loss for its financial year because of the coronavirus pandemic.
The pub company reported like-for-like sales are down 16.9% for the 44 days of trading to 16 August. The company stated: “Apart from a small number of development sites, and pubs in airports and stations, Wetherspoon reopened all its pubs in England, Scotland and Wales as soon as permitted. Some airport and station pubs have now reopened, but some remain closed.
844 pubs are now open, out of a total of 873. Like-for-like bar and food sales are down 16.9% for the 44 days to 16 August 2020. Sales have gradually improved, with a rapid acceleration recently, largely due to subsidised food, coffee and soft drinks in the early part of the week.
Sales have also been helped by the addition of extra outside seating. Landlords, landowners and local and licensing authorities have been extremely flexible in accommodating extra outside space – which has helped Wetherspoon and the licensed trade generally. The company nonetheless expects a period of more subdued sales once the scheme for subsidised early-week meals and drinks ends. The ‘on-trade’ (mainly pubs and restaurants) has been the subject of a much more onerous tax regime in recent decades than the ‘off-trade’ (mainly supermarkets).
Pubs and restaurants have been paying VAT on food sales of 20% and supermarkets zero. In addition, pubs have been paying about 20p per pint of business rates versus about 2p for supermarkets. This tax differential has created an increasing gap between on-trade and off-trade pricing, as VAT rates increased from 8% 40 years ago to 20% today. Supermarkets appear to have used their VAT advantage in respect of food to subsidise lower beer prices, in particular, and have taken approximately half of pub beer sales in that period. Pubs, restaurants, cafes and coffee shops are integral to the success of high streets.
As well as benefitting high streets and the public, tax equality would make general economic sense – it is an important principle of taxation that taxes should be fair and equitable. It makes no sense for supermarkets, often operating outside town centres, to have a tax advantage. The Chancellor, Rishi Sunak, has recently closed the VAT gap between the on and off-trade, by temporarily reducing VAT on food sales in the on-trade to 5%. If this major step towards tax equality is maintained in the long term, it will result in a significant increase in investment and employment in the on-trade.”