Thousands of businesses ‘could be forced to close’ unless Government intervenes on spiralling utility bills

By James McAllister

- Last updated on GMT

Thousands of hospitality businesses ‘could be forced to close’ unless Government intervenes on spiralling utility bills

Related tags Inflation Utilities Government Hospitality

Thousands of hospitality businesses ‘could be forced to close’ over the next few years unless the Government intervenes to help with spiralling utility bills, a procurement firm has warned.

Alex Demetriou, managing director at Regency Purchasing Group, says the rising cost of utility bills combined with increases to food and drink costs, supply chain issues and rises to the minimum wage have contributed to a ‘perfect storm’ that has left many businesses struggling to survive.

And he fears the situation is set to worsen further with hundreds of businesses now forward-planning their closures in line with forthcoming utility renewals.

“Until recently, a typical pub was spending around £2,000 per month on utilities, but businesses renewing their contracts are seeing their monthly costs increase to around £7,000,” explains Demetriou.

“That is an extra £60,000 a year, on utility bills alone. Many village and community pubs do not make £60,000 profit in a year, so the utility bill crisis alone is the difference between making money and losing it.

“In addition, pubs that serve food are seeing further challenges with not being able to recruit the staff they need, forcing them to close their kitchens, either for several days a week or, in some cases, closing them entirely.

“A number of our members have told us they are now making plans to close their businesses when their utility contracts are up for renewal later in the year.

“Unless the Government intervenes, I expect hundreds of hospitality businesses to close by the end of this year, and it could be thousands within a few years.”

Recent data compiled in partnership between leading industry body UKHospitality and sector data and insight specialists CGA revealed that more than 90% of hospitality operators are reporting higher energy costs.

In its latest trading update, published this morning (27 July), pub operator and brewer Marston’s said that the group’s electricity costs are expected to be some £2m higher than previously expected for the second half of the financial year. 

Coming after the group’s electricity contract ended in March 2022, Marston’s has now taken the decision to fix its electricity rates for winter 2022, covering the six-month period from September 2022 to March 2023 with an incremental cost impact of £3m.

Meanwhile, chef Simon Hulstone, who runs The Elephant in Torquay, wrote on Twitter yesterday​ (26 July) that the savings made by his recent decision to switch the restaurant to a four day week to help with both with staff and utilities has been wiped out by a new electricity quote that is 20% higher than what he pays now.

Demetriou adds that a lot could be learned from France, where there is a ‘tariff shield’ that protects both private and professional consumers from excessive increases in utility bills.

“Our whole country runs on utilities and it’s going to take a collective approach to ease the growing pressures on businesses, but that approach has to start with some significant Government intervention.”

Regency Purchasing Group works with nearly 4,000 businesses throughout the UK, including some of Britain’s biggest and best-known leisure attractions, hundreds of golf clubs, plus pubs, hotels, zoos, farm attractions and others.

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