The pub and restaurant group Mitchells & Butlers has warned that problems caused by Brexit and rising costs will hurt the hospitality sector, just as businesses return to profit after the easing of pandemic restrictions. The company, which owns pub chains including O’Neill’s and restaurant brands such as Harvester, said Brexit was still “an important event for the market” and had created risks for the sector, most notably around the supply and cost of products and workforce shortages. It said higher energy bills and increased staff wages were also weighing on the sector. Mitchells & Butlers – which also runs All Bar One, Toby Carvery and Miller & Carter – said customers began to return to its 1,600 UK venues when lockdown restrictions were relaxed in the spring. Its sales bounced back in August and September and it is now receiving bookings for Christmas parties. Announcing its annual results, the group said its suburban locations were trading better than those in city centres, as continued home working meant people visited their local rather than a branch near their workplace. Footfall in major cities has been slowly increasing in recent months, a trend the company expects to continue. Pub and restaurant-goers want to socialise with others in a way they cannot at home following pandemic restrictions, the group said, as it reported a pre-tax loss of £42m for the year to 25 September, compared with £123m a year earlier. Mitchells & Butlers said it had returned to profitability in recent months and its like-for-like sales were 2.7% higher than pre-Covid levels during the past eight weeks. Christmas bookings at its venues had begun later than in previous years, but were now coming in, said Phil Urban, the company’s chief executive, although this year’s get-togethers look to be smaller than usual. “We are seeing bookings in the cities and the suburbs, right across all our portfolio,” he said. “We have some big venues, particularly in London, that can take some big size parties and what we are probably seeing less of so far, is a company coming in and saying can we take your whole venue for a night. But that’s not to say they won’t be replaced by people having smaller-sized parties. We are encouraged on bookings”. On Wednesday, wine and spirits companies warned there could be alcohol shortages in the UK over the festive season, as a result of the lack of HGV drivers. Mitchells & Butlers said it had several medium-sized Mercedes-Benz Sprinter vans on standby, ready to collect goods from depots in the event of a missed delivery by lorry. “We have product in the supply chain, but either the supplier can’t get it to the depot or from the depot to the site. It’s a localised issue. The problem is we don’t know where it will be until it doesn’t turn up,” Urban said. He added he was able in some cases to send vans to depots to collect supplies, “rather than wait for our logistics to reschedule”. Mitchells & Butlers said it was working to offset the impact of rising costs, but warned they would have a residual impact on its performance in the current financial year. Higher utility bills remain a concern for the company, while it will also have to pay its staff more from next April as they benefit from the rise in the “national living wage” to £9.50 an hour for workers aged 23 and over. Amid rising costs, the company called for the government to extend the temporary reduction in the rate of VAT on food and sales of non-alcoholic drinks, which currently stands at 12.5% but is due to return to the pre-Covid 20% level next April. The company said the temporary tax cut was worth £81m to the business during the year to September.