Hospitality Stocks Hit by Budget Tax Hikes

The share prices of many major hotel companies have fallen significantly since the week before the budget, as investors have digested multibillion-dollar tax increases.

Shore Capital research released Monday showed Mitchells and Butlers Stocks were the hardest hit, down 13 percent compared to Oct. 23, while JD Wetherspoon fell 12 percent and marston shares fell 10 percent.

Shares of Premier Inn owner white bread have fallen 8 percent, and the bowling operator Hollywood Bowl is down 6 percent.

Shore expects all five businesses to take a financial hit from the National Insurance and National Living Wage increases announced by Chancellor Rachel Reeves just under a fortnight ago in her first Budget.

From April 2025, employers will pay a 15 per cent NI rate on staff salaries over £5,000, instead of the current 13.8 per cent tax on salaries over £9,100.

At the same time, the NLW will rise by 6.7 per cent to £12.21 an hour, and the minimum wage for 18-20 year olds will rise by 16.3 per cent to £10 an hour.

The hospitality industry has widely criticized the changes, warning that they will increase costs for businesses still struggling to recover from the Covid-19 pandemic and potentially lead to the closure of more venues.

Shore Capital estimated these changes could add about 4 percent to annual labor costs.

It believes the reduction in the NI threshold will represent the “largest contributor” to additional labor costs.

In absolute terms, M&B, owner of All Bar One, will be the hardest hit financially, paying up to £40m in extra costs, followed by JD Wetherspoon with around £35m in extra costs, and Whitbread, which will pay up to £30m. further.

But Shore Capital said JD Wetherspoon faces the biggest potential hit to its pre-tax profits; believes they could fall 46 percent.

Last Wednesday, the company’s founder, Sir Tim Martin, warned of widespread price increases across the British hospitality sector.

Martin said that although cost inflation had moderated over the past two years, it had “increased substantially again after the Budget”. “We believe all hotel companies plan to increase prices as a result.”

He made the warning alongside results showing Wetherspoons achieved record sales in the 14 weeks ending November 3, helped by higher food and drink orders as well as double-digit percentage growth in slot and machine revenue. of fruits.