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Pubs And Restaurants Want More Than Six Months Energy Support To Avoid Closures

Pubs And Restaurants Want More Than Six Months Energy Support To Avoid Closures

Many pubs are struggling with sky-high energy bills and are calling for government support this winter (Alamy)

6 min read

Leading figures in the UK’s hospitality industry say the government’s energy bills package for businesses won’t last long enough to save thousands of pubs from going to the wall this winter.

Prime Minister Liz Truss announced her “Energy Price Guarantee” would cap the price suppliers can charge domestic customers for two years, but support with spiralling costs for those on commercial contracts would only last for six months.

A number of hospitality groups have told PoliticsHome they want not only more “clarity” from government, but to be granted support for longer than six months and some acknowledgement that companies have already been paying increased bills for the past few months which has led to many closures or staff layoffs.

The government has said that although the business support is time-limited there is an option to extend it for "vulnerable businesses”, however there has also been no indication of what that means.

Full details of how the support scheme for businesses would actually work will be confirmed on Wednesday, after all government communications were paused for 10 days as a mark of respect following Queen Elizabeth II’s death.

While MPs will return to the House of Commons this week, Downing Street has admitted the plans may not be finalised this week ahead of another parliamentary recess for the annual party conferences, meaning it could be several more weeks before businesses have certainty over how they will tackle winter bills. 

The Prime Minister's official spokesperson has said the scheme “will support businesses with their October energy bills, including through backdating if necessary”, as the precise mechanism and amount of support may not be finalised till November.

But a number of businesses have said it is already too late to avert a crisis, following months of government stasis as a result of the summer recess, Tory leadership contest and pause to Parliament following the Queen's death. 

“Businesses are already making decisions about whether to close for the winter – they can’t wait another few weeks, and they can’t wait until well into October to start getting that support," Josh Green, head of public affairs at the British Beer and Pub Association, said. 

He told PoliticsHome that many businesses have already signed up to “punitively expensive contracts” because their renewal date for their gas and electricity came up earlier this year. Sharp increases in the wholesale energy prices as a result of increased global demand and difficulties in supply caused by the Russian invasion of Ukraine mean they have already been paying higher costs in July, August and September. 

Green fears that while any new support for businesses from October would be welcome, prices will not have dropped at the end of the six-month period, and as pubs sign up to long, fixed-term tariffs, they will end up locked in to unsustainable contracts well beyond the government support period.

He added: “The last few months have been massively challenging, and that's why we need that longer-term support too because some of the losses and the impact on revenues are already baked in, we've had a few months of this cost of living crisis that has already impacted us so it's not like it's all been sweetness and light up until this new price cap kicked in on the first of October.

“The next few weeks could potentially be make or break for some businesses.”

Sacha Lord, Night Time Economy Adviser for Greater Manchester, said without significant support, he believes seven out of 10 pubs will close this winter, and said the industry is “absolutely on its knees”.

“Operators out there are at the absolute end of their tether,” he told PoliticsHome, adding that hospitality firms need long-term support such as a VAT cut and business rates relief otherwise the industry faces “closure after closure after closure”.

Lord said the announcement by Truss that business support would only last until the end of March has “killed off any investments in my sector, because who in their right mind now would invest with a view that in six months’ time you might be back to energy costs at 500 or 600 per cent. It’s a ticking time bomb”.

He added that he is worried for the mental health of people running hospitality businesses, and that he has chosen to switch off direct messages on social media because the ones he was getting were “heartbreaking”.

“I know people who have lost their business, they’ve lost their homes because they remortgaged to get through it, and it’s ruined relationships, I know marriages that have broken down,” he added.

Greg Mulholland from the Campaign for Pubs said there was a feeling of "total despair” among publicans, with many in thousands of pounds of debt held over from the pandemic, who are now struggling with inflation as well as energy price increases. 

“Several million small businesses are actually unviable now without government intervention,” he said.

Mulholland felt offering only six months of support “is not the certainty that businesses need”, and criticised the delays in announcing help for small businesses.

“Six months is not sufficient, and it is absolutely crucial that those who have signed contracts have tied them into price levels that are extremely high must be addressed retrospectively, and they must be allowed to benefit from an energy cap as well,” said Mulholland, a former MP who is also Chair of the British Pub Confederation.

He also accused the government of putting “ideology above the urgent practical needs of many businesses”. 

“There is a profound lack of understanding of how serious this situation is for pubs," he said, and accused the government of a lack of urgency while businesses were already announcing closures. 

The Leeds brewery Nomadic Beers announced last week that they will be shutting their doors as a result of cost of living increases, while Jefferson Brewery said over the weekend they will close down temporarily until market conditions change. 

Michael Kill, CEO of the Night Time Industry Association, said government should have acted quicker, and that “a lot of people are making irreversible decisions off the back of what they know today”.He was critical of the way the industry has been treated by government, saying they have not been listened to about how dire the situation is.

“They turn you round and pat your backside on the way out, make you feel like you had a really good meeting but you’ve not really got any action from it,” Kill told PoliticsHome.

Molly Davis from British Institute of Innkeeping said landlords are “desperate” for detail from ministers, saying they are already “making decisions about their businesses literally on a daily basis because they are so up against it in terms of cash flow”.

She said pubs don't know if the contract they fix at a higher rate will mean that get the benefit of a lower rate as part of the new scheme.

“The government help will be from the first of October, so what does that mean if you've already signed up to a 300 per cent, 400 per cent increase on your previous contract?," Davis told PoliticsHome

"You've already had a huge impact from that in the last three months, or the last six months even, of bills.”

The Department for Business, Energy and Industrial Strategy have been contacted for comment.

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