Energy crisis: ‘Situation dire’ for pubs

By Nikkie Thatcher

- Last updated on GMT

Spiralling prices: Rising energy costs are crippling pubs across the country, says BBPA boss Emma McClarkin
Spiralling prices: Rising energy costs are crippling pubs across the country, says BBPA boss Emma McClarkin

Related tags Legislation British beer & pub association Finance

Trade body the British Beer & Pub Association (BBPA) has written to the two Conservative party candidates, urging them to meet with business leaders to help save pubs and other hospitality venues from closure.

The open letter to Rishi Sunak and Liz Truss outlines how a roundtable of business leaders should be arranged ‘at the earliest opportunity’ as the sector battles rising energy bills, staffing shortages and the cost-of-living crisis.

This follows a number of trade bodies, including the BBPA, demanding urgent action from the Government on soaring energy costs​.

The group of organisations stated many hospitality venues are reducing operating hours as a result of “rocketing energy prices”, which “have become a matter of existential emergency for businesses in our sector”.

Profitability impact

Furthermore, the British Institute of Innkeeping (BII) also highlighted the impact of the energy crisis on its members​.

A BII recent survey revealed rising energy costs was the having the biggest impact on profitability and since then, the crisis has escalated further.

With no cap on soaring prices for businesses, many BII members have reported hikes of 300% and more on their existing bills.

The BII estimated licensees need to trade at least a fifth (20%) more than pre-pandemic levels to stand still.

However, it also showed three quarters were trading below 2019 figures with almost nine in 10 (86%) reporting lower profits from the already reduced revenue.

Debt accrued

Additionally, many operators are also still paying off loans and other pandemic debts at an average of £40,000 per pub, according to the BII.

On the BBPA’s open letter to Truss and Sunak, BBPA chief executive Emma McClarkin said: “Our sector hangs in the balance, rising energy bills are crippling pubs across the country with only one in three turning a profit and that figure only likely to worsen as winter approaches.

“The situation is dire, what we are experiencing now is arguably worse than the pandemic because we are receiving absolutely no relief on out-of-control energy costs.

“We need urgent action from the Government to save businesses and jobs in communities across the country but we also need a long-term plan to ensure the health of the hospitality sector so it can continue to support the economic and social fabric of our country.”

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The letter in full:

Following on from the manifesto which we sent to you at the outset of the campaign, I am writing to you today to request that you convene an emergency hospitality sector roundtable.

This would aim to bring together business and sector leaders at the earliest opportunity should you be successful in the Conservative Party leadership contest, to urgently set out plans to secure the immediate future of hospitality in light of the extraordinary rise in the cost of doing business.

From your time in Government, you will know the hospitality sector was among the worst hit by the pandemic and our businesses are still suffering from its effects.

For example, the long periods of closures and restricted trading, meant beer sold in pubs was down 55% on 2020 and 36% on 2021.

Despite the assistance from Government, debt still built up over the course of the pandemic and there has been limited respite to rebuild revenues even since restrictions were lifted early this year.

Pubs and breweries across the UK showed real grit and resilience during the pandemic, however the impact of unprecedented energy price rises and the supply chain disruptions as a result of Russia’s invasion of Ukraine has ensured the turbulent times will continue for pubs and brewers just as we had hoped to build the road to recovery.

The coming months could be some of the hardest yet for our pubs and brewers as price rises, labour shortages and consumers increasingly tightening their belts makes just breaking even the most acute of challenges.

Already we have seen just a third of hospitality businesses are turning a profit – a number that will continue to fall as the situation worsens.

There is a real risk that the support the Government provided through the pandemic – for which we remain hugely grateful – could yet come to nought if support is not provided at this acutely difficult moment in time.

It is no exaggeration to say the future of thousands of pub and hospitality businesses hangs in the balance and the longer that no action is taken, the more significant the threat of permanent failure becomes.

We urgently need headroom to recover and grow. This country’s pubs and brewing industry are a major part of the economic and social fabric of communities across the country, adding millions of pounds in value to local economies throughout the length and breadth of the UK.

The sector creates well paid and skilled jobs with a clear path for progression – including in agriculture, manufacturing, technical and retailing – across the country.

Over 40% of those employed across the whole sector are 16- to 24-year-olds, providing a vital source of employment for young people and an early introduction to the world of work.

For this to continue, urgent action is needed to help industry deal with the serious challenges we’re facing.

The contribution of our sector is not, however, purely economic – the social value that pubs, and the brewers that supply them, add to British society cannot be underestimated and certainly should not be taken for granted.

Yet the fact remains the future of this iconic section of British culture is under severe threat. I hope you will support the growth and recovery of this dynamic and innovative sector by bringing together leaders from across the hospitality industry for an urgent roundtable, so that we can secure the future of thousands of individual businesses and find a way forward and support the wider economic recovery of the country.

I am available at your convenience to discuss the issues raised herein.

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