Whitbread plans price rise " by cutting costs and increasing productivity.

The Premier Inn and Costa Coffee owner said it would also "mitigate this substantial cost increase" by cutting costs and increasing productivity.

 

Also on Tuesday, Manpower said the living wage was sending "shockwaves" through the UK labour market.

Its survey warned the living wage was prompting employers to cut back on hiring.

The 70p an hour increase to £7.20 an hour from April for workers over 25 was announced by the Chancellor, George Osborne, in the Budget in July.

Manpower's survey of 2,101 employers found that UK jobs market was at its least optimistic level for three years.

James Hick, of Manpower, said some employers may seek to reduce the extra costs by taking on more younger or self-employed workers, who were not entitled to the living wage.

The Premier Inn chain to new locations such as Dubai airport

Expansion

Whitbread said on Tuesday that like-for-like sales at Premier Inn rose 4.3% in the 11 weeks to 13 August, with a 4% rise at Costa.

However, that was weaker than the 9.2% and 7.3% increases posted for the same period in 2014.

Shares fell 3.6% to £45.42 in morning trading on Tuesday, making Whitbread the biggest faller on the FTSE 100.

Overall like-for-like sales were up 3.3% in the 11 weeks this year.

Andy Harrison, chief executive, said Whitbread was on track to meet both full-year expectations and the company's growth targets.

It planned to open about 5,500 rooms in the UK, some 220 net new Costa stores worldwide and to install 700 to 800 new Costa Express machines.

Whitbread also owns the Beefeater, Brewers Fayre, Table Table and Taybarns restaurant chains, where like-for-like sales rose 0.6%.

The weak increase was blamed on a "soft pub restaurant market outside the M25".