RISING costs have taken the shine off strong trading at JD Wetherspoon after it handed its staff a five per cent pay increase and was hit by higher utility bills.

The chain, which has more than 900 pubs and about 29,000 hourly-paid staff, reported that like-for-like sales increased by 6.3 per cent in the 13 weeks to October 26 following a surge in business during August and September.

However, the pace of growth decreased in October while the month also saw a number of cost increases, such as the wage rise and those from suppliers.

Shares fell by more than four per cent after Wetherspoon said its operating margin fell to 7.7 per cent in the period, from 8.3 per cent for the same time a year earlier.

The company highlighted changes to the VAT treatment of gaming machines, which meant pubs are no longer allowed to set off VAT charged by suppliers against VAT charged to customers. It said the change cost an extra £3.6 million between February 2013 and last July.

Chairman Tim Martin recently called for a level playing field for pubs after revealing his firm paid £600 million in tax over the last year.

He said pubs 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.