Energy firms ‘getting richer’ at the expense of small businesses

Although wholesale prices have fallen since the energy crisis peak, business energy costs remain high and unpredictable, with many firms still paying more than double pre‑2020 electricity rates.

Non-domestic customers also continue to face pressure from network and policy costs, while ongoing geopolitical instability - particularly in the Middle East - has contributed to continued volatility.

Oak Taverns managing director Simon Collinson told The Morning Advertiser (The MA) there is little left for operators to do to counter what he described as a “relentless stream of cost increases”.

“[Energy prices] are another nail in the coffin of profit, through no fault of our own”, he said. “This time we cannot blame the Government, somebody is getting richer at the expense of small businesses and, as always, the hospitality industry is one of the hardest hit.”

Meanwhile, Philip Cutter, licensee of the Murderers/Gardeners Arms in Norfolk, said energy costs have stabilised but that electricity prices at the award-winning pub have trebled over the past six years.

Inflationary factor

“Operators that need to re-negotiate their energy contracts in the near future have an un-enviable decision to make”, he told The MA.

“Factoring in stability requires long term energy contracts - but the hope is that prices will ‘eventually’ come down, and therefore committing to short contracts requires re-negotiating more frequently.”

Cutter signed a two-year contract in October last year, but said he is already concerned about how high costs will be when the contract is due to be renewed in 2027.

He added: “Sadly, everyone is after your money and I have become very sceptical about suppliers looking out for our best long-term interests. In reality, our current supplier is simply ‘the best of a bad lot’.”

Despite investing around £40,000 in energy-saving measures, including new cellar cooling, a more efficient coffee machine, roof insulation and LED or low-wattage lighting, Cutter explained this had not been reflected in lower bills.

In addition, he told The MA energy prices were now having to be factored into bar pricing, adding “by its nature, hospitality businesses are large consumers of energy”.

“Unfortunately, it is yet another inflationary factor for bar prices”, he said.

Cutter further highlighted growing “mistrust” between energy providers and the hospitality sector, noting businesses do not benefit from a price cap similar to domestic users.

Misleading quotes

“I don’t feel that we get a fair deal when we enter renegotiations, with often misleading price quotes”, he added.

Larger operators are also feeling the pinch. Proper Pubs managing director Nathan Wall said cost pressures remain widespread across the industry.

He told The MA: “The cost pressure is across the board, whether it’s rates or utilities, but I wouldn’t want to be renewing our energy contracts right now in this environment with what’s going on in the Middle East, it’s incredibly difficult for people.

“We’re a big enough business that, thankfully… we’re not immediately exposed.”

He continued: “There are costs everywhere but it’s how you can try and mitigate those things without diluting your offer to the customer.”

Elsewhere, JD Wetherspoon founder and chairman Tim Martin this week told The Financial Times (FT) the pub group could see its energy bill rise by £170m as conflict in the Middle East continues.

Meanwhile, UKHospitality (UKH) chair Kate Nicholls told the FT independent operators are facing a “triple whammy” of high energy prices, increased minimum wages and rising business rates.

In its latest market update for The MA, Nationwide Energy warned global instability, including the war in Iran, has left businesses needing to renew contracts “vulnerable to paying higher costs”.