Pub giants allay fears of hospitality crisis despite higher wage bills

Pub giants Mitchells & Butlers and Fuller, Smith & Turner have both expressed confidence as the firms adapt to higher wage bills, in a positive sign for an industry which warned of crisis last year.

Mitchells, the owner of Harvester, Toby Carvery and All Bar One , reported like-for-like growth of 10.4 per cent over the core festive three-week period, built on “numerous record sales performances through the estate and the brand portfolio”.

The company, which employs just under 50,000 staff across its 1,784 locations, faces £100m of year-on-year cost hikes, “primarily driven by increased labour costs”.

But chief executive of Mitchells, Phil Urban, said he expected the chain “to deliver continued profit growth and market outperformance”.

Fullers said that like for like sales grew of 10.2 per cent over the five-week Christmas and New Year period, with a “consistent performance across all parts of the estate”. Like for like sales for the 41 weeks to 11 January 2025 were up 5.9 per cent.

Fullers chief executive Simon Emeny said the firm remained “confident of meeting market expectations for the full year”.

Fullers faces £8m in labour costs, with £3m attributed to the rise in employer’s national insurance and £5m due to wage increases.

The chain owns or leases just under 400 pubs and employs 5,500 staff.

In the wake of the budget, Mitchells & Butlers shares fell 13 per cent, which was the worst hit among major hospitality firms, while Fullers shares fell seven per cent – but this morning shares rose by five per cent and 1.5 per cent, respectively.

Hospitality firms have been vocal about the damage tax rises will do to the sector. Over 200 of the UK’s biggest hospitality businesses signed a letter to the Chancellor in November warning that the additional tax bill will force some businesses into liquidation and that others will have to drastically reduce their headcount and slash investment in order to meet the additional costs.

Changes announced in the budget were deemed “a direct attack on those labour-intensive industries that are the lifeblood of our economy” by Fuller’s chair, Michael Turner.

“The unintended consequences of these actions will be to drive inflation higher, put pressure on wages, and will drive many businesses to the wall,” Turner said last year.

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Investment still a priority

There were some stark warning that cost increases would wipe out the profit needed to reinvest, but both firms said they will continue to prioritise it.

Fullers said that it had “a number of major projects planned for the final quarter of the current financial year, including a £4 million investment at The Chamberlain Hotel in the City of London, which is already underway.”

It has also completed the purchase 5.7 million of the planned 6.5 million share in its buyback programme.

Mitchell’s Urban said: “Our focus remains on the effective execution of our Ignite programme of initiatives and our successful capital investment programme, driving cost efficiencies and increased sales.

“We continue to leverage the strength of our diverse portfolio of established brands and enviable estate locations and believe we are well positioned to further grow profitability and market share in the year ahead.”