Up to a quarter of a million jobs would be lost in a “bloodbath” on the high street if the government doesn’t extend its support on energy bills, an industry chief has warned.
The fragile industry is already struggling with its own version of “long covid” and many businesses will not survive another economic shock, Kate Nicholls, the chief executive of UK Hospitality, said.
The organisation estimates that if support is not extended, more than 10,000 hospitality businesses could be forced to shut their doors in the coming year – the same number that closed due to Covid.
That would create around 200,000 direct job losses and another potential 50,000 in supporting businesses.
One pub owner saw his annual energy bill double to £176,000 and said without further help, many in the industry would not survive.
Companies across the UK are braced for their bills to more than double in the spring as government support is turned off, according to a recent survey by the business group Confederation of British Industry (CBI).
In October, the government stepped in to help millions of firms cope with soaring energy costs partly cause by the war in Ukraine.
The scheme discounts the wholesale cost of energy for all companies, charities and public sector organisations but that help is due to run out within months.
Ministers have said they will continue to support some businesses, under a more targeted scheme, after April but they are yet to set out which will benefit, with the results of a review due to be published by the end of the year.
Energy-intensive industries, such as steelmaking, are expected to be covered by the extended help.
But Ms Nicholls said if the government does not extend the scheme in April, there would be “a bloodbath in the high street and across the hospitality sector”.
“These businesses are incredibly fragile. Energy costs have pushed businesses to be unviable overnight and if the scheme isn’t extended then we will have businesses that just no longer are a going concern and will have no option but to hand back the keys.”
The sector was already suffering after facing crisis after crisis, she said.
That included two years of lost trade, with many businesses taking on debt to get through the pandemic. A woeful season last winter caused by lower trade due to fears over the spread of the Omicron variant, followed by Russia’s invasion of Ukraine and rising energy and food costs.
Ms Nicholls called on ministers to offer the same support to businesses that they received this winter.
“You do need to keep it at the same rate,” she said. “And I think the government should also look at additional packages of support to sit alongside that.”
“I think you need it to last at least another six months until we know what the situation is with energy bills in October next year when the regulator looks at them again,” she added.
The extended support would also give suppliers certainty, she said, which would help overall costs.
“Anything less is a sticking plaster. We need to have a long-term runway to allow the industry to try and get through and recover,” she said.
Anthony Pender, co-founder of Yummy Pubs, which has branches in London’s Euston and Mile End, saw his energy bills soar from £89,000 a year to £176,000.
To get that price he had to sign a three-year deal with his supplier and is now locked in at that cost, whether gas prices fall or not. Had he not agreed to the deal back in May, he said he would have faced a bill of £540,000 this year.
He said his electricity bill now cost more than his rent and business rates and said he had friends in the industry who had already closed due to increased costs.
“We’ve had a bad run over the last seven to eight years anyway working with ever-finer margins and taxes going up. We’ve then gone through Covid which has wiped a lot of people out. We got to the end of that, but now have this social unrest and rising costs.
“I just see a lot of broken people. The majority of our industry is made up of small businesses. Twelve million people are employed by small businesses, and they’re all under threat. And there is no loud, open discussion about that.
“We’re having to make constant sacrifices. I still have a business and a roof over my head, so I count myself lucky – luckier than a lot of people I know,” he said.
Looking ahead to skyrocketing bills, Mr Pender called for harsher action on energy company profits, and for the energy users to be protected by capping prices.
Federation of Small Businesses policy chair Tina McKenzie said many hospitality businesses were “dangling at a cliff-edge” and if they were excluded from further energy support, it would “spell misery” for so many still reeling from the effects of the pandemic.
“Indeed, 22 per cent of accommodation and food businesses say they would be forced to become unprofitable as they cannot increase their prices. Meanwhile, a startling 42 per cent say they would need to downsize, close, or radically change their business model,” she said.
“The government must urgently announce the new version of the energy bill relief scheme for next spring that will help small businesses affected so deeply by the hiked cost of energy, or things will go from bad to worse.”
A CBI spokesman said: “Government support has been considerable already, but with the UK falling into recession, we must ensure any downturn is short and shallow so extending targeted support must be on the cards.”
A Treasury spokesperson said: “As the chancellor has made clear, high inflation is the enemy of stability and tackling it is the government’s number one priority.
“We recognise the challenges businesses are facing in the months ahead, which is why we are protecting them from rising inflation through business rates relief, the energy bill relief scheme which will save the typical restaurant 40 per cent on energy bills this winter, and a £2.4bn fuel duty cut.
“An ongoing review is considering how best to support businesses from April 2023, targeting taxpayer’s money to the most vulnerable.”
