Hospitality sector calls for ‘urgent’ government action on rising energy bills

Five organisations representing the UK hospitality sector have called on the government to take urgent action amid soaring energy costs.

The plea comes amid the ongoing cost of living crisis, which is expected to result in the typical household paying up to £4,200 per year for electricity and gas.

Labour leader Keir Starmer recently addressed the issue, saying that the party was looking at possibility of “freezing energy prices”. The proposal would be partly funded by a significant increase in tax on oil and gas company profits.

But the hospitality industry is also feeling the strain. In response, UK Hospitality, Night-Time Industries Association, the Music Venue Trust, the British Institute of Innkeeping, and the British Beer and Pub Association have written a joint open letter to highlight “rocketing energy prices” that are becoming “a matter of existential emergency”.

Those working in the sector are facing average annual bill increases in the region of at least 300 per cent, with their jobs and businesses being at “grave risk” as a result. The letter stresses the urgent need for the government, and the Tory leadership contenders Rishi Sunak and Liz Truss, to set out a comprehensive support package for those affected. 

Kate Nicholls, Chief Executive of UK Hospitality, explained: “Hundreds of hospitality businesses across the country are staring into an abyss of closure and possible failure, leading to thousands of job losses; so it’s now or never for government help and support if this vital sector is to survive the extraordinary threats pushing much of it to the very brink of existence.”

Mark Davyd, CEO of Music Venue Trust, noted the “two incredibly difficult years” that the hospitality industry has already experienced due to the COVID-19 pandemic, saying venues had to “fight for simple survival”.

He continued: “It would be an extraordinary outcome to see them closed and permanently lost because of an energy market that is completely out of control and not fit for purpose. The government must act to create a genuinely functioning market for energy services that can deliver supply at a reasonable cost or step in to create an affordable supply for businesses.”

Emma McClarkin, Chief Executive of the British Beer and Pub Association, stated that increasing energy bills are “putting pubs in real jeopardy”, adding: “Sudden, extreme price hikes are already forcing publicans to make tough choices, from reducing opening hours to cutting options on their menus. 

“We are experiencing a perfect storm that is not only shrinking but eradicating profitability margins. We urgently need an energy price cap for small businesses before extortionate bills cripple pubs and we lose them forever in communities across the country.”

Michael Kill, CEO NTIA, commented: “The government cannot continue to understate the escalating crisis within the energy sector, the contraction of energy suppliers is compromising the free markets primary purpose of generating competitive rates and service levels.

“Limited competition has resulted in energy tariffs that are already unsustainable, and without the Government’s intervention, businesses who have survived the pandemic, supported by public funding, will face further uncertainty, and in many cases, permanent closure.”

Steve Alton, CEO of the British Institute of Innkeeping, said: “The majority of our members are single site operators, running small, independent businesses at the heart of their communities. Without urgent action from government, these vital spaces for social connection, supporting local jobs, supply chains and community groups, will drown under the weight of the rising cost of doing business.”

Alton went on to say that the impact on businesses, “in many cases”, is currently “worse than that of the pandemic, which has already left them with average debts of £40k per pub”. He added: “The stark reality of the challenges now facing them cannot be underestimated. [The] government must act now to ensure we don’t lose these essential local community hubs forever.”

The open letter, which you can read in full below, warns that “not all businesses will be able to survive this onslaught, and those that can will be closely considering how they can keep their costs down just to stay afloat”. It goes on to describe the hospitality sector as a “powerful driver of economic recovery and growth” for the UK.

The open letter to HM Government is as follows:

Pubs, restaurants, music venues, nightclubs, hotels and wider hospitality have reached the point where the conditions for trading are so prohibitive that many venues are already reducing the hours they open their doors. Others are confronted with the threat of permanent closure. With chronic challenges in the supply chain, labour shortages, interest rates and inflation, rocketing energy prices have become a matter of existential emergency for businesses in our sector.

Hospitality operators face average annual bill increases in the region of at least 300%, putting at risk businesses and jobs. It is also increasingly clear that a significant number of energy providers have withdrawn service provision from the Hospitality market altogether. The primary purpose of a free market for energy supply to businesses is to create competition, which leads to improved services, competitive rates, resilient suppliers, and the ability to invest in long term and sustainable solutions to energy demand. In the Hospitality sector, there is unequivocal evidence that this primary purpose is failing.  

On Friday, the Government saw fit to declare a drought, in the face of inarguable evidence that weather conditions had caused a threat to the nation. The energy crisis is no less of a threat and deserves similar attention. Not all businesses will be able to survive this onslaught, and those that can will be closely considering how they can keep their costs down just to stay afloat. 

Hospitality provides 10% of jobs and 5% of GDP. It can be a powerful driver of economic recovery and growth for the nation, but it urgently needs a kick start. Business and consumer confidence is suffering, and we urgently need the Government and the leadership contenders to outline a support package for the sector. 

We urge you not to allow the stasis of party politics to stifle the urgent delivery of action on energy. 

Liz Truss has ruled out extending the current windfall tax on energy company profits under her plan to tackle the cost of living crisis, though her opponent Rishi Sunak is somewhat open to the idea (via Bloomberg). The winner of the Tory leadership race is set to be announced on September 5.

The government has already announced £37 billion of support for low-income households, but is being urged to do more as bills are set to increase further throughout autumn and winter.

Ofgem, the UK’s energy regulator, is due to officially announce the next energy price cap on August 26. This will be implemented on October 1, while a £400 grant to reduce bills will also begin to roll out. Ofgem will set the price cap again in November under its new policy to review it every three months, instead of every six.

Last week, former Labour PM Gordon Brown said that energy firms unable to offer lower bills should be temporarily brought into public ownership. It came after it was revealed that annual energy bills are expected to reach £4,200 from January.

Elsewhere, Martin Lewis – the Money Saving Expert – described soaring energy bills as a “national crisis” on the scale of the COVID-19 pandemic. “What we are facing right now is a financial emergency that risks lives,” he said.