The British Institute of Innkeeping (BII) has today written an open letter to Ofgem, demanding urgent action to tackle energy suppliers who are crippling fragile pub businesses across the whole of the UK.
Earlier this year, a survey of BII members revealed that 50% were forced into signing contracts at the peak of energy prices between July and December 2022. With meaningful energy support from Government falling away for the vast majority of pubs from 1st April this year, they are now facing a cliff edge of energy costs, alongside the surge in inflationary pressures in every area of their businesses.
As bricks and mortar businesses at the heart of their communities, they can only reduce their usage so much, with energy intensive kitchens & cellars, as well as the need for their bars to be warm and welcoming for their customers.
Without the ability to renegotiate contracts with suppliers that were signed in an unfair and uncompetitive market, many are facing bankruptcy, despite consumer confidence and turnovers growing in recent times.
Adrianne Mead, licensee of the Royal Oak in Isleworth is facing energy bills of over £100k a year, after being forced to take a 12 month contract in September 2022, at the peak of energy prices.
“We run a very successful pub, operating at the heart of the community for nearly 8 years now. We have survived through the huge challenges of the pandemic, but the threat to the survival of our business has now reached a critical level, with our energy costs tripling. At the time we signed our contract, Government had promised support for 2 years to consumers, and 6 months for businesses, and the then Prime Minister, Liz Truss, also promised business support after April 2023 ‘to vulnerable sectors, such as hospitality, including our local pubs.’
“The shortest contract available to us was for 12 months – we had no option but to sign, and we are now in a position where we are paying nearly £10,000 a month on the energy needed to keep our lights on and our kitchen open. If we were to get a contract with our supplier now as a new customer, we would only be paying £3,000 a month.
“These huge costs, delivered as part of a contract we had to sign in an unfair and uncompetitive market are now threatening the survival of our business – one that contributes a significant amount of tax into Government. More than that though, we stand to lose our home and our livelihood, whilst our community will lose a valuable and essential asset for local people. If we were allowed the option of renegotiating our contract with British Gas and YU Energy, it would save our business, but also benefit them, as if we have to close, they will lose all income from the pub.
“The stress we are feeling as a business is keeping us awake at night, putting an immense strain on our everyday lives. We have cut our usage as much as we can, but we are a warm, welcoming hub which provides so many local people with a place to escape from their own cost of living pressures, and we see it as our duty to continue to provide this.”
Steve Alton, CEO of the BII commented:
“Our members, independently running pubs in all communities, are in many cases days away from business failure, as a direct result of the unfair and unviable energy costs they are facing. These otherwise successful and essential community hubs are being forced to the brink of bankruptcy by energy suppliers, who are quite simply profiteering from vulnerable small businesses.
“Despite the Government’s initial intention to support pubs with energy bills past April 1st, the Energy Bills Discount Scheme (EBDS) provides almost no relief to licensees, who will now be paying, in many cases, more than 4 times more than they were in 2021. With wholesale prices falling dramatically in 2023, anyone signing into a new contract now can access prices as low as 30ppkWh, which is in stark contrast to contracted rates in 2022.
“Government’s extension of the Energy Price Guarantee (EPG) for domestic users was the right thing to do, protecting vulnerable consumers from the cost of heating their homes and cooking for their families. So many small businesses, but particularly pubs, will have no protection from the end of this month, standing to lose their businesses, family homes and livelihoods.
“Ofgem’s review of the numerous bad supplier practices including failure to pass on the Government support as well as rocketing standing charges, has already taken too long, and any further delays will now result in unnecessary business failures. They must use all of their powers urgently to encourage suppliers to recontract with those businesses who had no option but to sign deals at the peak of energy prices, or face being cut off.
“This is not just an issue of a small business disappearing – there will be a ripple effect on entire communities, losing essential skilled jobs, impacting on local suppliers & brewers, with lost Government taxation and repayment of pandemic specific debts.”
You can view the letter here.