Feeling the chill: Hospitality bosses fear energy firms are profiteering in a crisis

Pub and restaurant bosses have accused suppliers of “deliberately profiteering” of the energy crisis, with huge hikes to other costs despite government support.

While the government unveiled a six month business support package in September, the country’s boozers and eateries are far from feeling out of the woods as the temperature drops and the nights draw in.

However, operators have complained they are still being whacked with extortionate prices, as well as sky-high fees such as management costs, standing charges and security deposits.

There is also growing pressure on Downing Street to confirm future support from next spring.

This comes as businesses are facing a cocktail of rampant costs this winter, with margins under pressure all while consumers themselves are feeling the pinch.

Gas prices have soared to all-time highs this year, powered by a Russian supply squeeze on Europe following the country’s invasion of Ukraine. 

Average energy costs for venues have risen this year by 258 per cent while half of venues have seen bill increases of 400 per cent, according to UKHospitality survey data.

Hikes to management fees and standing charges have seen bills leap in some cases up to 700 per cent in comparison to 2021, the British Institute of Innkeeping’s research also found.

In fact, the extent of elevated costs such as these meant that, for many operators, the government’s relief scheme was only having “a limited impact”, according to the BII’s chief Steve Alton.

“Unsustainable” bills are threatening to devastate businesses that are “at the heart of their communities,” Alton said.

Hospitality feel the pinch from high energy bills

Chris Yates is one such restauranter who is staring down a quadruple increase to energy bills at his Italian restaurant chain Cafe Murano.

It was not possible to pass on the full impact of increases to customers, leaving the chain, which has restaurants in Covent Garden, St James’s and Bermondsey, in a perilous position.

Bewildered by a “huge difference” between the government’s published wholesale prices for gas and electricity and the rates being offered by energy suppliers, Yates is among many who feels that there is a “complete lack of transparency”.

Yates had been readying himself for bills to double, yet is now looking at a 500 per cent increase.

“You can argue there is still a discount on the rates suppliers are providing,” he acknowledged.

Yet the operator said he was “not sure suppliers are co-operating in the way the government envisaged.”

It’s rampant profiteering, poor legislation, blinkered thinking and psychopathic presumption that we are suffering…

Merlin Griffiths, First Dates bartender

Some businesses are also facing being quoted pricey deposits while shopping around for a new deal with a different supplier, with hospitality firms sometimes considered a high risk customers.

With the country hurtling towards a recession as inflation surpasses 40-year highs, a recipe of rising labour, food costs, hefty energy bills would make for “a really dangerous recession,” Yates warned.

As consumer footfall is also set to dip, venues faced “a really concerning year or two ahead,” the restauranter said. 

Energy bill aid was simply “not filtering through,” to businesses, Merlin Griffiths, First Dates bartender and pub owner, said in a social media rant.

“It’s rampant profiteering, poor legislation, blinkered thinking and psychopathic presumption that we are suffering,” he said.

Industry body pushes Ofgem to investigate

UKHospitality, which represents hundreds of firms that operate around 100,000 venues, has urged ministers to recommend that regulators urgently investigate whether suppliers are deliberately profiteering from the government’s intervention.

“I believe more can be done and will continue to apply pressure to ensure companies are charging fair prices for energy to our sector,” UKH boss Kate Nicholls told City A.M.

Market watchdog Ofgem has teamed up with the department for business, energy and industrial strategy (BEIS) to ensure businesses are receiving the full support they are owed under the support packages, it said.

Ofgem was aware that “some businesses are having problems in getting fixed rate energy deals and also that some are being asked to pay large deposits by some suppliers,” a spokesperson confirmed.

It was working to “determine if further action or assistance is needed” to help firms.

BEIS said it was working with Ofgem to confirm “licence conditions have not been breached and to ensure businesses are able to see the full effects of support offered by the scheme.” 

The department also stated that “a small minority” of businesses had reported some suppliers had set prices that “undermine the benefits” of government aid.

Suppliers urge Government to boost support

Business energy supplier Yu Group urged the government to clarify future support for businesses beyond this winter to guarantee pubs, restaurants and bars can make plans for their future.

It recognised the UK’s recovering hospitality sector was facing “difficult market conditions” and encouraged businesses to use smart metering services to provide certainty over their energy usage, especially with uncertainty over future government aid. 

The energy firm called on Downing Street to guarantee that “they are not leaving businesses without the much-needed support that will keep our hospitality sector running” when the scheme tapers off in April.

Swelling bills were “unsustainable, threaten viability and, when coupled with people and recruitment challenges, place unbearable pressure on the sector,” UKH’s Nicholls added.

Many venues have started to slash opening hours or close for certain days of the week owing to elevated energy bills, according to official data from the Office for National Statistics (ONS).

As bosses desperately seek out clarity in a tumultuous economy, one thing is for sure: this is set to be a tough winter for the nation’s vulnerable venues.