Shepherd Neame says Labour’s labor market reforms will increase costs and reduce flexibility

Shepherd Neame has raised concerns about the impact of proposed labor market reforms, as higher costs weigh on the brewer’s growth prospects.

The Labor government has promised to reform zero-hours contracts, abolish the three-day waiting period for statutory sick pay and give workers the ability to claim unfair dismissal from day one.

In the short term, Shepherd Neame warned that proposed changes to labor law could drive up costs and reduce flexibility.

It came as Britain’s oldest brewer revealed that sales rose 3.6 percent to £172.3 million in the 53 weeks ending June 29, following a strong recovery at its London sites.

The continued return of office workers to central London saw the group’s turnover within the M25 increase by 14.5 percent on a like-for-like basis.

By comparison, outside the M25 they grew by just 1.1 percent, amid bad weather, which mainly affected coastal areas last year, and pressure on consumers’ living costs from higher energy bills and interest rates.

However, rising retail and tenanted pub trade offset the decline in brewery and brand sales, which fell 7.4 per cent to £52.7 million due to declining beer volumes as the company focused more on on-trade venues.

As a result, the Kent company’s statutory pre-tax profit rose 38.1 per cent to £6.8m, even as its cost base rose 7.5 per cent.

In addition to higher labor costs, Shepherd Neame warned of an above-inflation increase in packaging waste and logistics costs, which she said will “slow our progress.”

The group saw cost base inflation of 7.5 percent over the past 12 months, which it said was “driven by the increase in labor and logistics.”

Nevertheless, she expects consumer confidence to improve over the next two years as interest rates fall and disposable incomes rise, factors that have traditionally boosted footfall in pubs.

In the thirteen weeks to September 28, the company’s like-for-like retail sales rose 3.8 percent thanks to sunny weather from mid-July to the end of August.

Meanwhile, comparable pub rental income for the nine weeks to August 31, 2024 was 3.1 per cent higher.

Jonathan Neame, CEO of Shepherd Neame, said: “We have great beers and pubs, a strong balance sheet and a well-balanced and cash-generating business.

‘We have a strong pipeline of pub developments and new opportunities in the hospitality industry at our heart. We are optimistic about the outlook for consumers and are well positioned for the future, despite the continued cost pressures we face.”

Founded in 1698, Shepherd Neame operates 291 pubs in London and the South East, serving pints of Spitfire, Bishops Finger, Whitstable Bay and Bear Island.