City comment: Hamish Champ

JD Wetherspoon's results encapsulate the concerns of those who fear a smoking ban. Sales in its non-smoking Scottish pubs are dipping and margins slipping, but the group was at pains to reassure the market last week that much is being done to improve matters, with food pushed to the fore and investment running into the millions to make life for those unable to break the smoking habit a little easier.

What interested City types at the results announcement was the relatively low margin growth Wetherspoon had eked out over the year. The shift away from booze and fruit machines inevitably impinges on operating profits and few expect the picture to be all that rosy south of the border when the ban comes in next summer.

What observers will be looking for is how well operators manage the change in their business mix. Much of the work is being done already. No-smoking trials have thrown up predictable results - for Mitchells & Butlers in Grimsby and at sites where JDW has had a go, business has slumped. Doubtless a level playing field after next summer will ease matters, but then it will presumably boil down to those with deeper capex pockets thriving and the rest altering their business models and levels of required returns in order to survive.

Mounting inflationary pressures could force interest rates up, say analysts. Great. Notwithstanding those who believe the forecasting of analysts to be "a waste of time", the 0.4 per cent rise in prices nudged inflation up to 2.5 per cent for August. Electricity prices are at a 25-year high, while gas prices in the last year have risen 38.5 per cent, a 43-year record, according to the Office for National Statistics. We all know who will end up shouldering these burdens in the pub world. Who will cope and who will not remains to be seen.