The Living Wage: Licensed Retail sector
“The Living Wage will again squeeze the bottom line of a sector that has suffered its fair share of intervention, most notably the smoking ban. While there are some mitigating factors, there will inevitably be some losers and many commentators are highlighting the risks of further failures in the sector."
Ian Wormleighton, Partner Restructuring Services
Wages represent over 30% of the Licensed Retail industry’s cost base (source: The Caterer) and so any increase in wages will likely have a significant impact on profits. Whilst the tenanted pub companies will not be directly affected by this legislation, the managed pub companies and restaurant operators will need to work out how best to mitigate this. In our view, prices will rise in the short term and companies will invest in technology to increase productivity and improve labour scheduling. The industry will also benefit from a 2% drop in corporation tax over the period (along with an increase in the NI allowance) as well as increased disposable income from its customers as a result of the Living Wage.
“Wetherspoon hits out at higher living wage”
The Financial Times July 15, 2015