Pubs and breweries will face huge financial losses, make no profit, and even have to permanently shut their doors if the energy bill relief scheme is not extended for them beyond March 31, 2023.
New research by Frontier Economics has shown that energy bills returning to their regular rate post-March would put pubs and brewers at a loss of 20% on average. The report showed energy costs were currently the biggest threat to their viability, and would be even more lethal when the relief scheme ended in April.
Pubs and breweries are also being hit hard by inflation, which is pushing up the cost of food, drink, and other key commodities. Many businesses have already implemented changes to reduce their costs, such as reducing their opening hours and making changes to their menu.
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The report warns that energy prices are still hitting pubs and breweries hard, and any further rises would be crippling to the industry. It also lays out possible government interventions to save pubs, like extending the support scheme or reforming the business rates system.
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Individual pubs and breweries across the country have also reported cases of poor practice and profiteering by energy suppliers in recent months. Some suppliers have sought to make money outside the restriction of the cap through increasing prices on other parts of bills or cancelling contracts at short notice, in some cases businesses have struggled to find suppliers because they have been deemed to be 'too vulnerable' as businesses.
Tim Black, associate director in Frontier Economics’ retail and consumer team, said: “Recent economic shocks of Covid, Brexit and the war in Ukraine have put sustained pressure on businesses. Our analysis shows the pub & brewery sector is facing a combination of surging costs – primarily energy, but also raw materials and wages – and falling demand, as consumers reduce their spending in the face of severe cost of living pressures. While there are different impacts across businesses and uncertainty on the outlook, the underlying economics of the sector makes absorbing these shocks incredibly difficult – and some firms will struggle to survive.”
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