What do you need to know?
Nearly 25% of restaurant, bar, pub, bistro and other businesses in the hospitality and leisure industries think they might have to close in the next 12 months according to a new survey commissioned by the energy group eEnergy.
The coming energy price crisis means that a quarter are considering the ultimate step of closure and liquidation while three quarters are already considering reducing opening hours or even making redundancies in an attempt to cut energy use and therefore charges.
Restaurants and other hospitality businesses are not protected by the controversial domestic user price cap so theoretically there is no upper limit on what energy prices could rise to for commercial users.
Currently the price of electricity for consumers is capped at 28.11p per kWh and a daily 50.27p standing charge. Gas is capped to 20.46p per kWh and a daily standing charge of 29.25p.
While the figures can vary from business to business depending on their energy contract and the amount of energy they consume, the average cost per kWh for business users is currently set between 46 to 57p with standing charges of up to 107.6p a day for electricity.
Gas unit prices average at 19p per kWh with daily standing charges of up to 169p
A 200% rise is not outlandish to consider and would mean a company paying £1,000 a month now would be paying £3,000 or more from October for exactly the same supply and usage.
Inefficient insulation and other inadequate measures can see up to a fifth of energy being lost each year to business users although 25% of respondents to the survey said that introducing better energy efficiency measures was a long-term solution and that more support should be forthcoming sooner.
Against this backdrop, three quarters of respondents in the hospitality and leisure sector said they still had plans to reach net zero emissions with almost half considering installing solar panels as a solution to high energy costs and the climate crisis.
This might seem counterintuitive based on the costs but research from Censuswide as well as anecdotal evidence from customers says that as many as three quarters of potential clients see a hospitality business’ sustainability credentials as an important factor when deciding where to spend their money.
Harvey Sinclair, chief executive of eEnergy, said: “The hospitality and leisure sector has been played a terrible hand over the past two years.
“Sky-high energy prices have heaped pressure on businesses still reeling from Covid.
“With many business owners considering redundancies or even closure, solutions are needed now, but we do not need to wait for government intervention.
“Government grants to finance energy saving solutions only have a 5 to 10% conversion rate and for most it takes 6 to 12 months to get a decision, causing further delays and burning more cash – and carbon.
“We believe the answer is simple: cutting energy waste and carbon should be as accessible as any subscription service, without upfront costs.
“Our survey shows UK businesses appreciate the scale of the challenge faced.”
In one high profile example of the scale of the upcoming crisis, The Lowry theatre and gallery complex in Salford said that their energy bills were set to triple in the coming months and would reach almost a million pounds to heat and light the complex during winter.
Chief Executive Julia Fawcett says this bill alone is substantially higher than the annual £860,000 Arts Council grant they receive posing a major challenge for the organisation to literally keep the lights on.
Many other businesses are facing a similar scale of increase but won’t receive six figure grants to help support them.
We’ve already reported on how the hospitality industry is being squeezed from every angle but the hits just keep on coming.
Insolvencies in the sector have increased year on year by 64% and many are finding current trading conditions even more challenging than under lockdown and Covid-19 enforced closures.
Rising inflation, staffing shortages, high labour costs and reduced consumer spending have forced the hand of various industry representative bodies such as UKHospitality and the British Beer and Pub Association (BBPA) and to write a joint public letter appealing for support and help.
Emma McClarkin, Chief Executive of the BBPA, said that the stasis of party politics right now could not be allowed to stifle the urgent delivery of action on energy.
She said: “The situation is dire and what (our members) are experiencing now is arguably worse than the pandemic because we are receiving absolutely no relief on out-of-control energy costs.”
Not a day goes by without a cost of living crisis story in any of our major newspapers or websites but the scale of the threat facing businesses is generally going under the radar in comparison to domestic users.
We recognise the danger which is why we offer a free initial consultation to any business owner or director who wants to do whatever they can, while they can to protect and preserve their business and their staff.
Our expert advisors will be able to talk to you about the various options available once they have a clearer picture of where the company is at and what short and medium term issues it’s facing.
Owners usually have more room to manoeuvre than they originally thought but only if they get in touch earlier. As time moves on and issues crystallise then the freedom to pursue different strategies also shrinks.
Get in touch this summer and we’ll do everything we can to make sure your lights are still on in the autumn.