Ofgem has announced that the energy price cap will increase to £3,549 per year for dual fuel for an average household from 1 October 2022. The rise, it says, reflects the continued rise in global wholesale gas prices, which began to surge as the world unlocked from the Covid pandemic and have been driven still higher to record levels by Russia slowly switching off gas supplies to Europe.
Although the energy price cap doesn’t apply to businesses, trade bodies are calling on the Government for help because of the knock-on effect the rise in energy prices will have on consumer spending, which has already been affected by high levels of inflation.
“What is happening domestically affects businesses as people will reduce their outgoings to pay soaring energy bills and hospitality is very much in the firing line,” says Colin Wilkinson, managing director at the Scottish Licensed Trade Association (SLTA).
“We’re already hearing of pubs and restaurants now considering closing over the winter period because they are unable to absorb recent sharp increases in energy bills. Already, there are reports of energy prices increasing by 300% and, in one case, just under 500% and energy providers requiring ‘bonds’ from hospitality owners looking for an alternative supplier.
“Businesses need help, and they need it now. There must be an energy cap for businesses, particularly for SMEs, perhaps based on the number of employees. It has also been suggested that the Government should introduce an energy furlough scheme to help businesses through this difficult time – in some ways, the energy crisis is having a more damaging impact on businesses than the pandemic.”
Wilkinson says that the recent interest rate hike, coupled with the energy crisis, could be too much for some SMEs to bear.
“Just when the hospitality sector is starting to recover from the pandemic, businesses have yet more costs to absorb. Most are still paying off debts incurred during Covid.
“Businesses have also been affected by the train strikes, many have reduced their opening hours because they can’t get staff and others are having to incur extra costs in finding staff who left the industry during the pandemic and because of Brexit. We’ve definitely reached a tipping point.”
A survey conducted by BigHospitality's sister title The Morning Advertiser earlier this week found that more than 70% of operators do not expect to make it through the winter without Government intervention, with nearly 80% of operators saying they could not afford the increase in energy costs.
UKHospitality chief executive Kate Nicholls has echoed the concerns of the SLTA and also called for more help from Government.
“While the energy price cap doesn’t apply to businesses, this steep rise for already cash-strapped consumers means they’re likely to cut back on visiting hospitality venues or, worse still, stop going out altogether. Higher energy prices also affect our sector’s employees, who now face even higher energy bills,” she says.
“Without an urgent and comprehensive government support package that helps both households and businesses, many hospitality venues are contemplating reduced trading, resulting in lower wages or lost jobs for staff who need their jobs more than ever if they’re to heat their homes.”
Earlier this month, the SLTA called for urgent measures to help businesses, particularly SMEs, including a reduction in the rate of VAT and lower business rates.
