PUB group JD Wetherspoon has reported a drop in profits after being squeezed by supermarket competition and a hike in pay and bonuses for pub staff.

The company, which has 936 pubs, some in Bradford, Cleckheaton, Keighley, Bingley, Shipley and Skipton, said sales were 4.5 per cent higher on an underlying basis in the six months to January 25 but profits before exceptional items fell one per cent to £37.5million.

Margins were under pressure following last year’s above-inflation five per cent increase in pay for staff and a rise in utility and supplier costs. The firm also allocated £15.3million in bonuses and free shares to its employees, 98 per cent of which was paid to those below board level and 83 per cent to pub workers.

Wetherspoon added that the pub industry continued to be at a disadvantage as supermarkets do not have to pay VAT on food sales and are effectively able to subsidise alcohol prices.

In the six weeks to March 8, like-for-like sales increased by 1.6 per cent, with total sales lifting by 5.6 per cent.