Wage-floor rises cost M&B £10m

MITCHELLS & Butlers, the demerged pubs arm of the Six Continents empire, will pay an extra £10m in staff costs due to next month's increase in the minimum wage.

The hourly wage floor jumps 30p to £4.50 on 1 October in a move that consultant KPMG claimed will cause serious financial problems for many firms, especially pubs and restaurants.

For M&B, the main beneficiaries will be its thousands of bar staff across the country.

Meanwhile, M&B also faces an extra £7m hit in its current financial year from increases in property rates, insurance premiums and pension costs.

It was careful to steer clear of the growing row between industry and unions over the issue. Unabashed by the complaints of companies, unions are pushing for the minimum to be set at £5 an hour.

But an M&B spokesman said: 'The minimum wage is here, it is being implemented and we will abide by it.'

M&B said it would take the extra costs on the chin, offsetting the hit to margins by bringing in productivity gains and cost savings on purchasing. The group has already pushed up productivity by 5% in the second half of the financial year just ended, it added. Overheads have also been slashed by £10m a year.

Meanwhile, in a trading snapshot before M&B enters its weeks of silence before announcing its full-year profits, the group said sales at its pubs appeared to be stabilising, thanks in part to the warm weather.

M&B is running promotional campaigns across its estate, offering deals such as cheaper meals at Harvester restaurants for early diners. Sales were benefiting, but the programme is having an impact on overall prices and margins. The average retail prices at M&B outlets will fall 1% in the current financial year.

Out-of-town pubs fared far better than those in town, although urban trading is showing signs of recovery.

M&B also fleshed out details of its return of capital to shareholders. Following a securitisation planned for its estate, shareholders will receive a special dividend and share consolidation returning at least £400m. The special dividend is expected during the first half of the current year.

The group recently pulled out of the bidding for Scottish & Newcastle's £2.5bn pubs estate.