Sacha Lord urges Ofgem to investigate ‘extortionate’ exit fees for hospitality businesses

Sacha Lord, the night-time economy adviser for Greater Manchester, has called on energy market watchdog Ofgem to launch an urgent investigation and support the cancellation of exit fees for small and medium-sized hospitality businesses as the pressures of soaring energy bills grow.

As of 1 April, the government's energy support scheme has been significantly scaled back, a move that industry leaders have predicted will mean the closure of thousands of venues across the UK.

The British Beer & Pub Association (BBPA) has warned that pubs will need to increase turnover by an average of at least 11% to break even, and that even with an improved energy scheme in place, turnover would need to be 8% higher than before the energy crisis.

Lord said: “As energy prices soared last year, we saw a host of providers decline to take on new contracts from the hospitality industry. This inevitably led to a black market where businesses were pressured into signing up to energy contracts far beyond their means with unscrupulous providers.

“We are now seeing these providers charging unwarranted prices for gas and electricity, and even more concerning are the extortionate exit fees being summoned as business owners now try to renegotiate terms.”

According to Lord, Manchester pizzeria Dokes has been asked to pay a £32,000 exit fee to terminate its contract. When the restaurant launched it was originally paying 17p per unit for electricity, but that soared last December to 70p per unit, capped at 47p per unit through the government’s energy cap scheme but only until 1 April.

He added: “Ofgem was set up to protect consumers and improve the energy system, but they are currently doing neither. We urgently require intervention from Ofgem to investigate these providers and provide a realistic pathway for businesses who without help will undoubtedly fall into bankruptcy.”

UKHospitality has said the sector is facing a £7.3b hike in its energy bills from 1 April, with energy costs now accounting for 11.4% of business turnover, up from 3.4% before the crisis, and has also called on Ofgem to take more decisive action to tackle the problem.