Business

Soaring energy prices threaten last minute orders for struggling pubs

Admiral Taverns’ 1,600 pubs have weathered the Brexit-induced labor shortage and months of closure during the pandemic. But it’s a struggle to find an electricity and gas supplier that can turn off the lights on some pubs for good.

The company’s £350,000-a-year energy contract ends this month and suppliers are refusing to bid. If he stays with the previous provider, which he would rather not do, he has to pay 10 times the price.

“No one is going to offer us a long-term contract,” said Chris Jowsey, chief executive, who says most pubs pay for their own energy, which previously accounted for about 5 per cent of sales. “We will lose a lot of the pubs we got from Covid to rising energy bills.”

Admiral isn’t the only one struggling to find a long-term energy contract at a reasonable price. Hotels, restaurants and gyms are all complaining that gas and electricity providers are refusing to quote, extend contracts or, if they do, offer grossly inflated rates and threaten businesses already battered by the pandemic.

Huw Edwards, chief executive of industry group UKActive, said so sharply rising energy prices meant that large, energy-intensive gyms and leisure centers with swimming pools were “now at serious risk of closure”.

The next few weeks will be critical: experts say that although the tailor-made contracts with energy suppliers often run for two to five years and can expire at any time, many deals end in April, matching the financial year.

Admiral Taverns managing director Chris Jowsey warns some pubs are being closed due to high electricity bills © Danny Sleeuwenhoek

While providers are required by law to offer consumers a “believable” price, the same protections do not apply to businesses. Energy bills will be capped at £2,000 a year for most households from April, but there is no charge cap for corporate customers.

The average gas bill for a small business in London rose about 258 per cent in the year to February – from £1,345.07 to £4,815.36 – and 145 per cent for electricity – from £4,724.73 to £11,589.89, according to the Federation of Small Business , stating that this month’s even more extreme price swings sparked by the Ukraine conflict are exempt.

Energy UK, the trade body for electricity and gas utilities, said the burden on suppliers of rising wholesale gas prices means they have to make a “commercial decision on whether it is viable to take on a particular business customer”. Due to the sharp rise in energy prices in recent months, 30 providers have already left the market.

Michael Kill, chief executive of the Night Time Industries Association, said when suppliers agreed to power pubs and restaurants they often required upfront security deposits of £10,000 or more in cash.

The rise in energy costs could send many small businesses to the wall, he added. “Independents are the ones who suffer because they don’t readily have the cash flow to pay for pension deposits.”

David Moore, founder of London restaurant Pied A Terre, said when he was transferred to another supplier following AMPower’s collapse in December, he was billed for £2,500 for 10 days of electricity. He had previously paid about that much every month.

He found a new supplier through an agent, but the cost is double what it was and due to the risk profile of the deal, Moore had to sign the deal on the day of the bid to secure that price.

Hoteliers have complained in private groups on Facebook that providers like Npower are refusing to take over small operators.

Npower, Eon’s industrial and commercial utility business, said it was focused on “supporting existing customers with shorter-term contracts.”

“Due to the unprecedented price volatility and lack of liquidity, it is extremely difficult to offer competitive prices to new customers at this time,” it added.

Innkeepers are particularly vulnerable to being denied supply contracts as many live locally.

“Often it’s their home, but they qualify as commercial property. There’s no cap for them to let them benefit domestically,” said Emma McClarkin, chief executive of the British Beer and Pub Association, before adding: “It could make them leave their homes.”

“The pubs are already out of debt, they’ve lost all trade [during the pandemic] and are sunk by huge increases in energy,” McClarkin said.

Energy is just part of a cocktail of rising costs in the hospitality industry: wages have already risen as the industry struggles for staff, ingredient costs are rising and VAT on food and tourism will fall back to the full rate of 20 per cent in April, after being lowered during Covid. Corporate interest rates will also rise.

To cushion the blow, pubs and restaurants are raising prices but risk losing customers who have only just begun to return post-Covid.

JD Wetherspoon, one of the UK’s cheapest pub chains, raised its prices last week and Admiral Taverns said it was likely to do so. Admiral Taverns’ Jowsey said it was a “failure of market regulation” that he could not find an alternative supplier.

But energy regulator Ofgem said its “top priority is protecting consumers”. It added that it was closely monitoring the situation, but “companies can generally identify a suitable new deal.”

This article has been amended to clarify that Admiral Taverns only pays the bills for some of its pubs

https://www.ft.com/content/bf3c02c1-cb06-44b0-815d-6efdb6b4c941 Soaring energy prices threaten last minute orders for struggling pubs

Adam Bradshaw

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