Hospitality faces 'existential threat' as soaring energy bills leave sector facing 'mass business failures'

By James McAllister and Stefan Chomka

- Last updated on GMT

Hospitality faces 'existential threat' as soaring energy bills leave sector facing 'mass business failures'

Related tags Energy Government Pub & bar Restaurant Inflation

The soaring cost of energy threatens to cause 'mass business failures' across the hospitality sector, industry leaders have warned amid desperate calls for the Government to take immediate action.

Two separate letters, one from the pub and brewery sector and another from the British Takeaway Campaign, have been written to the Government and both Conservative leadership candidates today (30 August) to plead for support.

Representatives from J.W Lees, Greene King, Admiral Taverns, St Austell Brewery, Drake and Morgan and Carlsberg Marstons, who make up the Board of the British Beer and Pub Association (BBPA), have signed a letter warning small businesses will close and jobs will be lost if immediate action isn’t taken on energy bills for businesses.

“We have publicans who are experiencing 300%+ increases in energy costs and some energy companies are refusing to even quote for supply,” William Lees Jones, managing director of JW Lees.

“In some instances, tenants are giving us notice since their businesses do not stack up with energy at these costs. These are not just pubs but people’s homes and the hearts of the communities that they sit in.”

The letter, which highlighted the need to implement an urgent support package that effectively caps the price of energy for businesses, noted that the issue of energy costs was impacting the entirety of the industry’s supply chain, with major CO2 producer, CF Industries announcing last week​ that will be ceasing production of what is a critical component in beer production and dispense in pubs, citing market conditions as a key decision driver.

Nick Mackenzie, chief executive of Greene King, says the huge rise in energy bills is hitting the UK’s pubs hard.

“Up and down the country our tenants and free trade customers are receiving untenably high bills, with one reporting a rise of £33,000 a year for energy,” he continues. 

“While the Government has introduced measures to help households cope with this spike in prices, businesses are having to face this alone, and it is only going to get worse come the autumn.

“Without immediate government intervention to support the sector, we could face the prospect of pubs being unable to pay their bills, jobs being lost and beloved locals across the country forced to close their doors, meaning all the good work done to keep pubs open during the pandemic could be wasted.”

Kevin Georgel, chief executive of St Austell Brewery, notes that one of his tenants, whose current gas contract is ending next week, was quoted yesterday with a 417% increase on what he currently pays for a one-year fixed price deal.

“It’s unsustainable for publicans to run their businesses in this climate and increases of this scale will more than wipe out the entire profits of the business,” he says.

“Having survived the unprecedented challenges arising from the pandemic, pubs and breweries are once again faced with an existential threat because of circumstances beyond their control. The cost of energy threatens to cause mass business failure and the loss of thousands of pubs across the country.

“We are now hugely concerned on behalf of our licensees, who are paying extortionate fees for their energy, and many remain in unsustainable out of contract rates. Some are finding it impossible to find an energy supplier that is willing to provide a contract for a pub. .

“This situation is reflected in our own business where the cost of energy, wider inflation, and reduced trade levels are creating the perfect storm.”

Independents feel the heat

Independent takeaway businesses are also calling on the Government for urgent support amid the energy crisis.

In a separate letter backed by the British Takeaway Campaign more than 750 restaurant and café owners have called on the Government and both Conservative leadership candidates to take immediate action to ensure they’re able to keep their doors open.

The letter outlines measures the Government needs to take to support the sector, including a cut in VAT to reduce the cost of energy and keep food affordable for customers; the provision of grants to small businesses to cover the immediate cost of energy bills; and business rate rebates and greater forbearance from HMRC in agreeing repayment plans with commercial taxpayers in arrears.

“The Government has waited until the last moment to act before, but now cannot be one of those times. It must work with the Conservative leadership candidates on a plan to support Britain’s smallest restaurants before it’s too late,” says Ibrahim Dogus, chair of the British Takeaway Campaign.

“Restaurants are going bust every single day, and the hundreds that have signed this letter, and the many more the British Takeaway Campaign represents, don’t want to be another boarded up shop.”

Night time economy 'at risk of collapse'

Echoing the warnings of the pub and brewery sector, the Night Time Industries Association (NTIA), which represents some 1,400 independent bars, clubs and live music venues across the UK, says spiralling energy costs are pushing the entire night time sector to the brink.

“Billions of pounds of public funding spent during the pandemic could be wasted if Government cannot get a handle on current cost of inflation crisis, energy bills have increased over 300% for over 80% of businesses within the night time economy,” says Michael Kill, CEO of the NTIA.

“The current climate would see this crisis take more businesses to the point of failure than the pandemic. As we move towards the colder months, where energy consumption increases, we will see costs spiral out of control.

“The next few weeks are critical, and will require swift action from the new prime minister taking over.”

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