Utility firms’ £1bn weekly bonanza and Covid loans timebomb

Time is ticking on more than one issue: Andy Slee says the Chancellor must do something for the sector in Budget
Time is ticking on more than one issue: Andy Slee says the Chancellor must do something for the sector in Budget

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I am optimistic about the long-term future of hospitality. If lockdown taught us anything, it was people’s hunger to meet friends and family and to support local community pubs and breweries.

That same period had a huge impact on society, which is still being felt across our sector and the 1m people we employ.

I was reflecting on this when speaking to a well-established small brewer/multiple pub operator earlier this week who was comparing his April to December 2019 performance with that in April to December 2023.

The figures are sobering.

On the face of it, turnover looks healthy but beneath the façade there is a story that should worry everyone all the way to number 10 Downing Street.

Sympathy less generous 

In the four years to 2023, the amount spent on labour in that small chain has risen by 63% with utilities rising by 119%. Utilities are now comfortably the second biggest cost.

No one begrudges a fair wage to the teams that work so hard. Sympathy is less generous for the £1,000,000,000 per week profit made by the utility companies and their shareholders. Remembering 1bn seconds is nearly 32 years. 

But dig further and there is another timebomb lurking. Many SME brewery and pub businesses were helped by Government-backed Covid loans. All good at the time and gratefully received at a time of huge uncertainty.

The repayment terms on those were much shorter than standard commercial loans and with interest rates variable, this adds more uncertainty to businesses as we strive for recovery.

The same independent businesses facing those labour and utility pressures also faces increasing debt repayment costs leaving them with little room to expand or to deal with unforeseen bumps in the road.

Sector can be heart of economic recovery

Some say the hospitality sector moans... our frustration comes from understanding the opportunity and the potential for local brewers and pubs to be at the heart of local economic recovery.

This is why, among other things, SIBA and its members are lobbying the Government for, a widening of the differential in beer duty to 20% between draught and packaged beer and for greater flexibility in the repayment terms of Covid debt.

Surely, its better for the UK taxpayer to have its debt repaid over a longer period than lose it all if the company fails and goes into administration?

The future of our great sector is optimistic but fragile and needs help on 6 March when the Chancellor get to his feet for the pre-election Budget.

In the meantime, think of the hard-working brewers and publicans next time you see Baroness Michelle Mone on TV trying to play the Covid ‘victim’.

Related topics Legislation

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