Hospitality struggles with energy costs up 81%

Eighty-six percent of operators are ‘concerned’ or ‘very concerned’ about soaring energy prices.

Pubs, bars and restaurants are struggling to make ends meet, with energy prices alone soaring 81% since last year and costs now three times higher than in 2021.

New industry-wide data shows that just 29% of hospitality businesses feel optimistic about the next 12 months, with energy being their biggest concern. The issue has prompted an alliance of trade bodies to once again make a plea to the government to force energy suppliers to offer fair rates. 

The survey asked people running pubs, bars, restaurants and other hospitality businesses about their operations and prospects and highlighted how critical the energy crisis has become for the industry over the past year; with 86% of respondents concerned or very concerned about energy costs and the average bill now up by 81% since last year and three times more than in 2021.

Industry at 'breaking point'

Data collected by CGA Insight on behalf of the British Institute of Innkeeping (BII), UKHospitality, the British Beer and Pub Association (BBPA) and Hospitality Ulster showed businesses that were forced into long-term fixed rate contracts between July and September 2022, as energy prices continued to rise, felt the least optimistic about their prospects over the next 12 months. 

Of those businesses that locked into a contract at the peak of the energy crisis between July and September, almost half (46%) felt their business was at risk of failure in the next 12 months, with 92% citing energy prices as a significant contributor to that risk. These businesses were also less likely to have cash reserves and almost half (46%) of all respondents had less than three months’ worth.

Responding to the data, BII, BBPA, UKHospitality and Hospitality Ulster are calling on the government to insist energy suppliers offer renegotiations to businesses trapped in sky-high contracts, or at least offer financial support to those at acute risk.

The joint statement says:

"The energy crisis has been pushing pubs, bars and restaurants to breaking point for a year now. The Energy Bill Relief Scheme provided a short respite but with that falling away last month businesses are back to paying high costs, with no end in sight for the thousands locked into contracts who will be obligated to pay extortionate rates well into next year.

"Put simply, this data is extremely worrying for thousands of otherwise viable hospitality businesses. No profits mean nothing to invest back into businesses, no cash reserves mean nothing to fall back on, and businesses being forced to close means important, irreplaceable assets being lost from local communities and economies across the country forever. The government must recognise this crisis isn't just crippling businesses now. Left unresolved it will have a lasting wider impact long into the future, impacting local employment, supply chains and removing essential community hubs from villages, towns and cities across the whole of the UK.

"Suppliers must be instructed to offer renegotiation to businesses locked into long-term, high-cost contracts, whilst businesses on the brink should be offered direct, targeted support. The people running pubs, bars and restaurants in neighbourhoods across the UK want to remain there and provide the absolute best for their communities but feel they are fighting a losing battle, they need support now."

In addition to calling for immediate action on energy costs, respondents to the survey also cited relief to VAT and wholesale reform to business rates as longer-term measures to support the industry and enable businesses to invest and grow.

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