Energy hikes exceed 200% as hospitality operators report difficulties securing provision

Energy price hikes exceeding 200% are being reported by hospitality companies with some energy providers refusing to even issue quotes to businesses.

 

Steep price increases in oil and gas, already threatening the viability of many business models, have been exacerbated by the Russian invasion of Ukraine, with some operators reporting difficulties securing agreements for supply.

 

Joe Cussens, managing director of the Bath Pub Company, was quoted £252,000 by his existing supplier when he came to renew the contract for the four-strong group – a 215% increase on his previous rate of around £80,000.

 

He said: “We’ll always fix our energy costs for a long period because the market generally speaking always goes in one direction, but unfortunately we’re coming to the end of our fixed period right now and it seems the problem is just getting worse and worse on a daily basis.

 

“In normal times you go back to your provider and negotiate and you get a price a lot cheaper than what’s first quoted, but now when you speak to them they say we’re not even issuing quotes at the moment. It's an unrecognisable market from anything I’ve ever seen.

 

“One issued a quote for two or three hours and then withdrew it again, there’s a palpable sense of panic and Ukraine is another factor disrupting the energy market. Right now, we can’t even find anyone to quote us. It’s hard to know where we’re going to go.”

 

Alex Claridge, chef patron of the Wilderness in Birmingham, has seen energy prices at his restaurant increase by 150% since 2020. On top of this he has faced a months-long struggle to find an energy supplier for a bar his is trying to open a bar in the city’s jewellery quarter.

 

He told The Caterer: “We completed the lease in August, but it’s been carnage. We couldn’t get an electrical provider and couldn’t get a meter installed. In the end we had to hardball our landlord to pay a consultant to set up an electrical contract – it’s a 20-cover bar.”

 

Cussens was confident he could work with a broker to secure a new contract, while Claridge said his team would weather this latest storm, but both were worried about the wider impact on the industry.

 

“I think we’ll be alright but this could wipe out all the profit we expect to make in the next 12 months. We will prevail, but I fear that for many other operators this could be the final nail in the coffin,” Cussens said.

 

He added: “I want to see the trade associations making a much bigger deal of this one and really lobbying government. We’re reading that energy firms are issuing big dividends and making huge profits. You can’t have a system where you’re willing to allow one part of the economy pick up that profit by sacrificing large swathes of the rest of the economy.

 

“The government spent a lot of money supporting hospitality, it would be an awful waste to let market forces run rampant and decimate a number of those businesses now.”

 

The British Bar and Pub Association (BBPA) has estimated increased energy prices will add costs of £800m to the sector this year.

 

Chief executive Emma McClarkin said: “The pub and brewing sector is at a pivotal point in its recovery and the erosion of margins is impossible to sustain. We are urging the energy regulator, the providers and the government to work with us and take a more pragmatic approach with regards to the provision of energy to the hospitality sector.”

 

A UK government spokesperson told The Caterer: “We recognise the impact rising global gas prices will have on businesses of all sizes, which is why we are in regular contact with Ofgem, business groups and energy suppliers to understand the challenges they face and see how they can best be supported.

 

“We have backed businesses throughout the pandemic with an unprecedented package of support including VAT cuts, business rates holidays and government backed loans worth around £400b, and we will continue to stand firmly behind them.”

 

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