By Neil Maidment
LONDON (Reuters) - Whitbread (L:WTB), one of Britain's biggest employers, plans cost savings and will raise some of its prices to counter the substantial impact of enforced wage increases at its Premier Inn hotels and Costa Coffee businesses.
The British government announced a bumper pay increase in July, with the current 6.50 pound minimum wage set to rise to a 7.20 pounds for those aged over 25 from next April.
Renamed the "living wage", the rate will grow steadily over the following four years to around 9.35 pounds an hour, a far greater increase than Whitbread and other businesses had expected.
Whitbread said as a result, it was developing plans to increase the productivity of its staff and systems and would introduce selective price rises to offset the cost increase. Detailed plans will be given at its half-year results on Oct. 20.
"Whitbread has been a long standing supporter of a steady, sustained real increase in the national minimum wage," Whitbread Chief Executive Andy Harrison told Reuters on Tuesday.
"(However) the scale of the increase is bigger than we would have expected and clearly employment costs are our biggest single cost."
Shares in the group fell 2.4 percent in early trade to 4600 pence.
Whitbread employs around 42,000 hourly paid staff on a wage bill of 460 million pounds, around 18 percent of group turnover. Of that number, some 34,000 are paid under 7.20 pounds an hour.
Harrison said it had yet to decide where price hikes would occur across its businesses, which also include restaurants, adding its priority would be to improve productivity. The firm has spent millions of pounds recently on staff training and new rota planning systems to boost efficiency.
Job losses were not planned, Harrison said, though it would likely take on fewer extra staff in the next two years.
Group like-for-like sales grew by a weaker than expected 3.3 percent in the 11 weeks to Aug. 13, down from a 4.3 percent rise in its first quarter, with Premier Inn and Costa both reporting slowing growth figures.
Whitbread said it remained on track to meet full-year expectations and new opening targets.
