What’s the real cost of your £4 pint on Wetherspoons staff?

JD Wetherspoons boss, Sir Tim Martin declared last month that the popular budget pub chain will not raise prices this year. The move has been celebrated by punters. But it is bad news for the business’ 40,000-strong workforce.

The hospitality industry is currently in a pay crisis. Following a record national minimum wage rise in April 2024, almost one in five bars, pubs, and restaurants told Startups they would be unable to meet employee pay expectations this year.

Many are raising prices to strengthen their bottom line and afford the increasing overheads. But customers are also seeking out cheaper deals. So how do businesses balance a competitive salary with keeping prices down for consumers?

Beer and food price freeze

Speaking to The Sun in mid-July, Martin made the pledge to keep food and drink prices steady for the remainder of the year, following a 7.7% rise in like-for-like sales since May.

Spoons, as it is affectionately known, has made a name for itself as an affordable eatery despite inflation pushing up costs at other chains. While the average cost of a pint is expected to rise to £5.22 this year, Wetherspoons’ cheapest pint is Carling for £2.49.

Martin has pointed to easing industry costs and inflation as factors enabling him to keep prices down. Still, while inflation is slowly falling, hospitality wages remain low.

Most of the Wetherspoons workforce are paid the National Living Wage (the minimum wage for over 21-year-olds), which today is £11.44. Yet the real Living Wage, which more accurately reflects the cost of living in the UK, is estimated to be £12 per hour.

Like all large employers, Spoons has raised pay to meet the new legal requirements. In April, the chain poured £164m into staff wages in response to the new rate.

However, its promise not to raise prices means staff will continue to see real wages fall this year. Meanwhile Martin, who earns a CEO salary of £324,000, received a £10m share windfall at the end of last month.

Labour shortages continue

Martin’s decision not to raise prices could come back to bite him given the challenging landscape ahead for hospitality hiring.

Staff shortages continue to threaten productivity at UK bars, pubs, and restaurants. Over 3,000 London establishments have closed since COVID, and many are raising salaries rather than lowering them in order to attract and retain talent.

In 2023, when pay growth was at its peak, a Hospitality Hiring report found that UK employees in the sector had received an average annual pay rise of 9.5%, compared to the national average of 6.6%.

Those that could not offer higher pay rates had relied on cheaper overseas talent to plug hiring gaps. In a recent interview with The Guardian, the pro-Brexit Martin reiterated that he would still support migration from the EU in order to source staff for his pubs.

This has been complicated by the last Conservative government, which introduced stricter minimum income requirements that have made it much harder to hire from abroad.

Keir Starmer, leader of the new Labour-led government, has not signalled he will change these laws back, despite many hospitality firms demanding help with recruitment.

Price rise vs sales drive

It’s not just Spoons. The debate in the hospitality sector over whether to raise staff wages or keep costs down for customers has tripped up many industry leaders this year.

For example, Scottish brewery and bar chain Brewdog found itself in hot water after it revoked its Real Living Wage status. The business had paid the volunteer rate since 2015.

Critics derided the move as going against Brewdog’s company values, but CEO James Watts said it was unaffordable to increase wages given the firm’s already tight profit margins.

Some might agree that maintaining low prices is essential for attracting customers in a competitive market. Yet, as awareness of the hospitality pay crisis grows, research suggests that some UK customers are willing to forego value if they know their hard-earned spend is supporting a positive and people-focused company culture.

According to a report by the Real Living Wage Foundation, 67% of Brits said they would be willing to pay more at hospitality venues if staff were paid a real Living Wage.

Martin’s choice to keep prices low appeals to a core audience of budget-conscious boozers. However, it risks alienating a growing segment of consumers who prioritise fair wages, and making their beer a bitter pill to swallow.