Admiral Taverns’ 1,600 pubs have survived Brexit-induced labour shortages and months of closure during the pandemic. But it’s the struggle to find an electricity and gas supplier that may switch off the lights of some pubs for good.
The company’s £350,000 a year energy contract ends this month and suppliers are refusing to quote. If it stays with its existing provider, which it would rather not, it will have to pay 10-times the price.
“No one will provide us with a long-term contract,” said Chris Jowsey, chief executive, who says energy previously accounted for roughly 5 per cent of turnover. “We’re going to lose a lot of pubs that we got through Covid to rising energy bills.”
Admiral is not alone in struggling to find a long-term energy contract at a reasonable price. Hotels, restaurants and gyms all complain that gas and electricity providers are declining to give quotes, renew contracts or, if they do, offering steeply inflated rates, threatening businesses already battered by the pandemic.
Huw Edwards, chief executive of industry group UKActive, said the steep rises in energy prices meant that large, energy-intensive gyms and leisure centres with swimming pools were “now at major risk of closure”.
The next few weeks are critical: although the bespoke contracts signed with energy suppliers often last two to five years and can expire at any point, a large number of deals come to an end in April in line with the financial year, say experts.
In addition, while suppliers are obliged by law to offer a “credible” price to consumers, the same protection does not apply to business. Energy costs will be capped at £2,000 a year for most households from April, but there is no limit on charges for corporate customers.
The average gas bill for a small business in London rose roughly 258 per cent in the year to February — from £1,345.07 to £4,815.36 — and by 145 per cent for electricity — from £4,724.73 to £11,589.89, according to the Federation of Small Business, which says this excludes this month’s even more extreme price fluctuations sparked by the conflict in Ukraine.
Energy UK, the trade body for electricity and gas providers, said the strain on suppliers from soaring wholesale gas prices meant they must make a “commercial decision on whether it is viable to take on a particular business customer”. Thirty suppliers have already exited the market as a result of soaring energy prices in recent months.
Michael Kill, chief executive of the Night Time Industries Association, said that when suppliers do agree to provide pubs and restaurants with energy, they are often demanding upfront security bonds of £10,000 or more in cash.
The spike in energy costs could result in many small businesses going to the wall, he added. “Independents are the ones suffering as they do not readily have the cash flow for utility deposits.”
David Moore, founder of the London restaurant Pied A Terre, said that when he was transferred to another supplier after AMPower collapsed in December, he received a bill for £2,500 for 10 days worth of power. Previously, he had paid roughly that each month.
He found a new supplier through a broker but costs are twice what they were and because of the risk profile of the business, Moore had to sign the deal the day it was offered in order to secure that price.
Hoteliers have taken to Facebook to complain in private groups that suppliers including Npower are refusing to take on small operators.
Npower, Eon’s industrial and commercial supply business, said it was focused on “supporting existing customers with shorter-term deals”.
“Due to the unprecedented price volatility and a lack of liquidity, it’s extremely challenging to provide competitive pricing for new customers at this time,” it added.
Publicans are particularly vulnerable to being refused supply contracts given many live on site.
“Often it is their home but they are qualified as a commercial property. There is no cap on them to let them benefit domestically,” said Emma McClarkin, chief executive of the British Beer and Pub Association, before adding: “It could see them out of their home.”
“Pubs have already got debt behind them, lost out on all that trade [during the pandemic] and are being sunk by huge energy increases,” said McClarkin.
Energy is just one of a cocktail of rising costs in hospitality: wages have already increased as the industry fights to find staff, ingredients costs are climbing and in April VAT on food and tourism will return to the full 20 per cent rate having been cut during Covid. Business rates are also set to rise.
To cushion the blow, pubs and restaurants are lifting prices but, as a result, risk losing customers who have only just started to return after Covid.
JD Wetherspoon, one of the UK’s cheapest pub chains, raised its prices last week and Admiral Taverns said it would probably follow. Jowsey of Admiral Taverns said it was a “failure of market regulation” that he was unable to find an alternative supplier.
But energy regulator Ofgem said its “top priority is protecting consumers”. It added that it was monitoring the situation closely but “businesses can generally identify a suitable new deal”.