Whitbread’s adoption of National Living Wage to hit Costa coffee prices

Whitbread PLC, the owner of the UK hotel chain Premier Inn and Costa coffee shops, announced on Tuesday that it is developing plans to adopt the governments national living wage policy, however it will mitigate the cost of this scheme by a combination of productivity improvements, and selective price increases.

Chancellor George Osborne announced in his July Budget speech that the national living wage would increase by GBPo.70p per hour to GBP7.20 an hour from next April for workers over 25. The national living wage is expected to rise to at least GBP9.00 per hour by 2020.

In the year ended 26 February 2015, Whitbread reported a 13.7% increase in group revenue to GBP2,608.1m and underlying profit before tax of GBP488.1m, an increase of 18.5%. The company, which also owns restaurant brands, Beefeater, Brewers Fayre, Table Table and Taybarns, employs over 45,000 people in over 2,200 outlets across the UK, serving more than 25 million UK customers every month.

The company said that it continues to deliver its “ambitious organic growth plans” and its total sales increased by 11.1% in the 11 weeks to 13 August. Like for like sales also increased by 3.3% in the last quarter. 

Whitbread will reportedly open 5,500 UK rooms; 220 net new Costa stores worldwide; and install 700 to 800 new Costa Express machines this year.

According to the BBC, recruitment company Manpower has carried out a survey of  2,101 employers, which found that UK jobs market was at its least optimistic level for three years. The company warned that the living wage was prompting employers to cut back on hiring and said the living wage was sending “shockwaves” through the UK labour market.

James Hick, of Manpower, was quoted as saying: “some employers may seek to reduce the extra costs by taking on more younger or self-employed workers, who were not entitled to the living wage.”