Hospitality and leisure businesses are becoming increasingly worried about the energy price crisis, with as many a quarter of bosses thinking of shutting up shop in the next 12 months, a new survey shows.
More than three quarters are considering reduced opening hours to tackle rising energy bills, research from eEnergy and Censuswide reveals.
One business owner worried about rising energy bills is Mandira’s Kitchen, an Indian cafe based in Surrey Hills.
Owner, Mandira Sakar, said energy bills are likely to more than double in the coming months leaving her ‘terrified.’
Wasted energy: hospitality businesses with poor energy efficacy are wasting a fifth of their energy consumption, but only a quarter are looking to make energy efficient improvements
She says prices will rise from 21p/kWh to 49p/kWh and she’s concerned this figure will continue to rise. Businesses are not subject to a price cap like households are.
She said: ‘I’m just terrified now. It’s not like a house where you shut off the lights or decided to put an extra blanket on.
‘So, if a monthly bill has gone up from £1,000 to £3,000, for a small business like us, that has huge ramifications.’
‘We cook on gas, we have to make sure our walk-in freezers run, and we have commercial microwaves which are very very electricity hungry. I’m just now terrified because it has an impact on everything.
‘We’re constantly firefighting at this point, struggling to make sure we stay open.’
There is growing concern among businesses that the long-term effects will have an even greater impact on a sector still recovering from lockdowns and supply chain challenges.
Nine in 10 business owners said they did not expect energy prices to return to last year’s levels within the next 12 months.
In response, 83 per cent said they had either previously cut staff to tackle the rising prices, or were considering making redundancies, or reducing staff hours to cope.
Six tips for businesses to cut down energy bills
1. Track your energy consumption with a smart meter to be sure you are within your budget.
2. Once you know what energy is being consumed consider cuts or changes, such as more efficient appliances or turning appliances off when not in use
3. Swap your small electronics, such as LED light bulbs or automatic timers or motion sensor lights to cut costs
4. Turn your air conditioning off where possible or turn your heating down by 1C to cut up to a third of your bill
5. Invest in renewable energy, such as solar, or better insulation for long term cuts to your energy bill
6. Consider if you are on the right energy tariff and switch providers if you find a better deal elsewhere
Mandira has considered reducing operating hours, but says that cutting costs is not as simple as closing up shop for the day, as she fights to keep her staff employed.
She says the cost of living crisis is harder for her business than lockdowns, as she was still able to operate her business, despite the restrictions.
She adds: ‘Being a small business, we are obviously quite adaptable. We were very lucky during Covid because we were able to change our tactic every single day.
‘Our online business grew and grew. We were really successful. This crisis, this is way beyond our control.
‘You have no staff, the cost of fuel has increased, God knows how many prices have increased.
‘This is beyond anything that I’ve seen or experienced.
‘How can we plan for catering next year when we don’t know what our prices will be? It’s scary and worrying.
‘It’s like bailing water out of a ship, a sinking ship and you’re trying to bail it out with a fork. It’s just awful.’
For businesses like Mandira’s it’s been difficult adapting to changes since Covid, but with prices continuing to soar, she admitted that she hasn’t had the time to think about how to cut down on her energy bills.
The research found that businesses were overpaying for their energy due to poor energy efficiency.
Nearly all businesses of 500 surveyed reported they were wasting more than a fifth of their energy each year.
Shut up shop: a quarter of UK hospitality businesses are considering closing in the next 12 months due to rising costs as four in five are considering staff cuts to stay afloat
With businesses likely to face more pressure in autumn and winter, calls have grown for additional government support to help ease the strain.
A quarter of hospitality businesses said that introducing better energy efficiency measures was the long-term solution, while nearly a third called for a government support scheme to be introduced to help the sector.
Ofgem’s energy price cap only includes households, not businesses.
How do energy bills for businesses compare to consumers?
Unlike consumers, businesses are not subject to Ofgem’s quarterly price cap.
This means that businesses are seeing a huge increase in their energy bills, with seemingly no end in sight.
Currently, the price of electricity for consumers is capped at 28.11p per kWh and a daily 50.27p standing charge. Gas is capped to 20.46p per kWh and a daily standing charge of 29.25p.
For businesses, these figures can vary depending on the contract and the amount of energy they use.
The average cost per kWh for business energy users is currently set between 46p and 57p, with standing charges of up to 107.6p a day for electricity.
Gas unit prices are on average 19p per kWh, with daily standing charges of up to 169p.
Unlike consumers, businesses are potentially still able to switch providers to get a better deal.
As a result, energy suppliers are potentially passing on their costs to businesses by increasing gas and business electricity costs, and with no cap in place, business energy bills could continue to soar.
Harvey Sinclair, chief executive of eEnergy, said: ‘The hospitality and leisure sector has been played a terrible hand over the past two years.
‘Sky-high energy prices have heaped pressure on businesses still reeling from Covid.
‘With many business owners considering redundancies or even closure, solutions are needed now, but we do not need to wait for government intervention.
‘Government grants to finance energy saving solutions only have a 5-10 per cent conversion rate and for most it takes 6-12 months to get a decision, causing further delays and burning more cash – and carbon.
‘We believe the answer is simple: cutting energy waste and carbon should be as accessible as any subscription service, without upfront costs.’
Steve Alton, chief executive of the British Institute of Innkeeping, said: ‘Our members, who independently operate pubs in every community across the UK, are all facing exceptional business pressures and the largest impact on their profitability is utility cost increases.
‘With many operators struggling to make any profit despite summer trading, their position is extremely fragile.
‘There is no need for business failure with the right level of support which will allow our nation’s pubs to be at the heart of levelling up and regeneration in every community.’
|Business size||Annual usage||Electricity||Gas|
|Unit price||Standing charge||Unit price||Standing charge|
|Micro Business||5,000 to 15,000 kWh||50.6p||55.7p||20.5p||38.4p|
|Small Business||15,000 to 25,000 kWh||52.0p||43.9p||16.5p||34.2p|
|Medium Business||25,000 to 55,000 kWh||52.7p||44.7p||18.5p||36.7p|
|Large Business||More than 55,000 kWh||46.2p||107.6p||20.5p||169.0p|
|Figures from Bionic – 1 August 2022|
Crucially, the energy crisis comes at a time of growing action on environmental issues.
Almost three-quarters of businesses in the hospitality and leisure sector said they had plans to reach net zero emissions, with almost half considering installing solar panels as a solution to high energy costs and the climate crisis.
This is reflected in consumer trends, with the same Censuswide research finding that three quarters of people see a hospitality business’ sustainability credentials as an important factor when deciding where to spend their money.
Sinclair added: ‘This survey shows UK businesses appreciate the scale of the challenge faced.
‘We must all now work together to make better use of the affordable solutions that are readily available to overcome today’s challenges and put the UK back on track to reach net zero; from cutting energy waste to installing solar panels and EV chargers.
‘This is good for profits and jobs, good for the planet, and it’s all possible without upfront costs or taxpayer support.’
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