Expert Insight
NEWS from
Kate Nicholls UKHospitality Chief Executive
I heard an all too familiar tale the other day, about a popular and hitherto successful Indian restaurant that had been forced to close after 11 years’ trading in a small, county spa town.
Last year, the owners struggled to fulfil takeaway orders. Drivers, like so many others, were
struggling with high fuel prices, which meant making deliveries had, at the end of a typical evening, left them out of pocket.
While, at the same time, serving those customers who visited the restaurant became increasingly difficult due to a shortage of staff.
But what finally did for this once thriving family business was energy costs. It wasn’t the first hospitality business to have to close due to sky high prices and, I’m sad to say, it certainly won’t be the last. In fact, I think we can expect a huge number of closures for the same reason in the coming weeks and months.
The reason for that is analysis by UKHospitality that shows that energy costs for the sector are set to be £12bn higher than prior to the energy crisis we’re now mired in.
April 1st marked the introduction of the Energy Bill Discount Scheme, which greatly reduces the support available to businesses, and leaves the hospitality industry facing costs of £7.3bn in increased energy bills. Without meaningful action to rein in some blatant profiteering by some energy suppliers, the sector will no doubt see thousands of venues go out of business.
A snap survey of UKHospitality members revealed that almost half
(41%) had been refused a quote by an energy supplier for the sole reason that, wait for it… they were a hospitality business.
Worryingly, energy costs show no sign of coming down, and they now account for 11.4% of business turnover, up from 3.4% before the crisis. It’s a crisis that’s suffocated businesses over the past year, causing thousands to fail and forcing many more to take drastic measures to afford extortionate energy bills.
Indeed, a £12bn increase in energy costs in a year is almost incomprehensible and, frankly, unsustainable for much longer. The transition to a continued, but significantly reduced, energy support scheme does not provide much comfort for anyone, especially with the £7.3bn price tag it comes with.
As part of a review that UKHospitality was calling for, energy regulator Ofgem recognises that some unscrupulous suppliers have used this crisis as an
opportunity to boost their bottom line, but has yet been unable to take decisive action. Its current plans to ‘consult on suggested actions’ in the summer is not soon enough for our industry.
Which is why we’ve continued our engagement with Ofgem directly, and recently held a roundtable discussion them to discuss the issues hospitality venues are having with their energy suppliers. We’ll continue to lead on this sort of engagement, which also gives operators the opportunity to share their concerns with the regulator.
Ultimately though, should Ofgem feel it doesn’t have the teeth to get to grips with this problem, the Government must step in immediately and sanction profiteering energy suppliers, or otherwise grant the regulator more powers.
Regular customers of that county town’s Indian restaurant were very sad to see it go, but not even their loyalty was enough to save it from escalating energy costs.
6
April 2023
www.venue-insight.com
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