Pub groups M&B and Fuller’s warn on prospects as costs rise

Two of the UK’s leading pub operators have warned that high inflation and the cost of living crisis are likely to hurt their businesses for the long term.

Mitchells & Butlers, the UK’s largest listed pub group, said on Thursday that cost pressures presented a “major challenge” to the business and the wider hospitality sector. It said utility, labour and food costs would “persist at or above current levels well into the next financial year, increasing and prolonging the medium term impact on margins”.

M&B, which operates 1,482 pubs nationwide, reported a 0.9 per cent increase in like-for-like sales in the 13 weeks to July 16. Drink sales were down 1.3 per cent over the period. The pub group said the first five weeks of the quarter started strongly but fell back across a period including the Queen’s platinum jubilee weekend, strike action by transport unions and the recent heatwave.

Fuller’s, which operates 385 sites concentrated in London and the south-east, struck a similar cautionary note. Chief executive Simon Emeny warned that “industry-wide inflationary cost pressures” around food supply, labour and energy were showing “little signs of abating”.

The warning came despite an improvement in trading performance. In the 16 weeks to July 16, Fuller’s total sales were up 3 per cent on 2019 levels. Like-for-like sales were up 27 per cent on the same period last year, during which the pub industry was still subject to Covid-19 capacity limits.

“Hospitality continues to bear the brunt of many challenging external factors, but we remain confident that Fuller’s is well placed to continue to prosper,” Emeny said.