‘Rising energy costs hitting firms at worst possible time’

07-Feb-2022 - Last updated on 07-Feb-2022 at 10:32 GMT

Rising costs: increasing energy bills are hitting operators amid a myriad of other soaring prices (image: Getty/coldsnowstorm)

Rocketing energy bills are crippling the sector at “the worst possible time”, following the impact of Plan B guidance over the festive period and ahead of Government support such as the lower VAT rate and business rates support ending.

This comes after a continuing rise in energy costs, which is reported to be down to wholesale gas prices quadrupling in the past year, according to energy regulator Ofgem.

The British Beer & Pub Association (BBPA) urged the Government to back its calls for continuing the 12.5% VAT rate, to decrease beer duty and for a reform on the business rates system to help pubs battle the ongoing rising costs.

Further setback

BBPA chief executive Emma McClarkin said: “Pubs and brewers experienced another devastating winter and a further setback to their recovery. The sector is experiencing record levels of debt and are facing increased costs across the board from energy through to raw materials, as well as supply chain difficulties.

“We are urging the Government to heed the calls of our Long Live The Local campaign that seeks to support the sector for the long term by extending the current lower level of VAT, lowering beer duty, and introduce business rates reform that reduces the disproportionate burden paid by pubs.”

This follows a survey from UKHospitality, which found operators are experiencing a soar in prices across the board.

Businesses had reported a 41% rise in energy bills, a hike of almost a fifth (19%) in labour costs and a similar proportion (17%) in food prices. In addition, drinks prices had increase by 14% and insurance costs by 21%.

Triple whammy

This has resulted in prices across the sector predicted to rise by more than a tenth (11%) throughout the year in a bid to battle escalating costs.

UKH boss Kate Nicholls added: “Rising energy costs hit businesses across the hospitality sector at the worst possible time, following devastatingly poor Christmas and new year trading and ahead of April’s triple-whammy of rising VAT, business rates and employment tax.

“There’s only so much hospitality businesses can do to mitigate energy cost increases by themselves, so anything [the] Government can do to ease the pain would be welcomed, but long-term solutions are needed if hospitality is to make a full post-pandemic recovery unhindered by yet more financial concerns.”