Hospitality Hoping to Check Out of High-Cost Energy

Many of us are feeling the strain with energy prices showing instability and reaching all-time highs in recent years. In the UK, the hospitality sector has been hit particularly hard due to the inflation of food prices, with a staggering 4,600 businesses forced to close their doors in the past year. Restaurants are enduring a tough period, with a 7.8% drop in licenced premises in the country.

Business owners are now calling energy regulator Ofgem into question and accusing suppliers of jeopardising the industry.

Ofgem Under Pressure

Despite wholesale energy prices dropping in the first half of 2023, some have alleged that energy suppliers have failed to pass these savings on to customers. Many business owners signed up for fixed-price tariffs when prices peaked in 2022, believing it was the best option available to them. Since then, energy costs have shown a downward trend due to reduced demand and other contributing factors, leaving companies paying over the odds for their usage.

Energy regulator Ofgem said they wrote to suppliers to urge them to ‘show flexibility’ with businesses locked into these fixed-price contracts, but because suppliers purchased fuel in advance, savings will take time to carry through to the consumer.

Hotels Hit Hard by High Rates

Only some people think Ofgem has done enough. Sarah Czarnecki, a hotel director from Yorkshire, penned an open letter to the regulator, pushing for intervention to aid over a million firms nationwide trapped in high-rate tariffs.

Czarnecki said: “My ask, in writing to you as the industry regulator, is that you listen to the voice of the SME sector and work with energy suppliers to reflect on the declining cost of energy and allow those firms stuck in high tariff contracts to be offered more favourable terms. The notion of a ‘blend and extend’ arrangement has been mooted and would allow SMEs to combine their existing rates with those which reflect current trading reality.

“A number of hospitality businesses have already closed their doors citing the inability to survive in the face of unmanageable energy bills. If no action is taken, we run the risk of losing more crucial businesses which form the bedrock of high streets in every city, town and village in our country.”

Glenn Evans, a hotel owner from North Wales, said: “Bill increases were about 400%, but the out-of-contract rate was even higher. We're looking for the Government to recognise that there was a dysfunctional market and that between them and Ofgem, they allow us access to today's prices. We need hot water for our guests, we need the fridges on, we need the kitchen ventilation and we just can't cut back on parts of the operation."

Bills Biting Back for Pubs and Restaurants

Britain’s cherished pubs are also struggling. Associations representing licenced establishments called on the Government to intervene in energy expenses and contractual agreements. The British Beer & Pub Association, UKHospitality and the British Institute of Innkeeping wrote a joint letter to Amanda Solloway MP, Minister for Energy Consumers and Affordability, appealing for help to avoid what they warn could be ‘mass job cuts’.

TV chef and pub owner Tom Kerridge has called for support for the hospitality industry. The proprietor of the first two Michelin-starred pubs said its energy bills rose by an eye-watering 600%, and insurance costs shot up by £25,000 since the last COVID-19 lockdown. In addition to insurance, rising rents and mortgage rates have been compounding factors for the hospitality sector.

Kerridge said: “There’s been absolutely no let-up. There hasn't been any positivity or good news in three or four years. Every day feels like you're walking uphill, on glass, barefoot.”

How you Could Save Money on Energy

With energy costs and fixed price contracts adding unwanted complications for the hospitality sector, many business owners want to cut their bills. At BusinessComparison, we can help compare deals from energy providers, allowing you to find the best rates.

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