Pubs: As record number predicted to go bust in 2023 hospitality guru urges gov to lift sector from ‘the abyss’

A record number of pubs, restaurants and clubs could go to the wall amid eye-watering energy bills and a consumer down-turn in the first quarter of 2023, warned a leading industry voice.

The sector was “staring into an abyss”, according to the chair of the Night Time Industries Association, Sacha Lord.

The industry representative – who is also the night time economy adviser for Greater Manchester and co-founded the Park Life festival – called on ministers to further support venues.

The Chancellor said on Wednesday that an existing package of energy bill support would be slashed this spring, and the government would instead focus on avoiding a cliff-edge for businesses.

Currently, the Energy Bills Relief Scheme subsidises prices at a rate of £345 per MWh for electricity and £91 per MWh for gas.

The six-month scheme will conclude in March and is expected to cost £18bn.

Chancellor Jeremy Hunt told business leaders yesterday it was vital that the taxpayer’s “exposure to volatile international energy prices” is reduced.

Gas prices on the spot market have been declining in recent weeks, with Cornwall Insight forecasting sharp drop-offs in the energy price cap for households at the end of the year.

However, with businesses typically on long-term contracts for energy, it could take time for this to be felt in their bills.

Lord: I can’t sugarcoat pain for hospitality sector

Many businesses will hand in their keys over the next few weeks now that the key Christmas trading period is over, Lord told City A.M.

Footfall to pubs and other venues would “dramatically die away” in the coming weeks.

“I can’t sugar coat it, hospitality is a luxury and when people’s pockets start getting tighter, the first thing you cut is a luxury,” he said.

While the government had helped the hospitality sector through the Covid-19 pandemic, “with support pulled away, we are in a much worse position than we were then.”

Independent and family-run firms will be forced to shut, with the high street being “swallowed up” by large corporates, Lord feared.

It comes as figures from the Night Time Industries Association revealed that one nightclub in the UK is closing every two days, meaning that if this trend continues every club would be shut by 2030.

I can’t sugar coat it, hospitality is a luxury and when people’s pockets start getting tighter, the first thing you cut is a luxury…

Sascha Lord, chair of the Night Time Industries Association

Lord called on ministers to slash VAT on meals and soft drinks at venues to 10 per cent for a couple of years, as has been done in other European nations.

UKHospitality boss Kate Nicholls said the present energy bill scheme “had been a lifeline for many hospitality businesses whose bills would have gone up more than threefold had it not been in place.

She called on the support to be extended or otherwise the sector faces “a steep cliff-edge in April,” alongside other challenges such as price rises, staff shortages and rail strike disruption.

“We do also need to see a practical, long-term energy strategy from government that can ensure a sustainable and affordable supply for both businesses and consumers,” Nicholls added.

Pubs need to check their energy bills

Jack Arthur, energy expert at Uswitch for Business told City PM pubs are suffering the “toughest winter in living memory” with the fallout from the energy crisis, Covid pandemic and Brexit. 

He argued the cost of keeping the lights on is “driving some businesses to the brink of collapse”, adding to soaring costs across business operations. 

Uswitch polling reveals 30 per cent of SME businesses with public-facing premises, including pubs and restaurants, plan to reduce the use of electrical appliances to save energy and over one in ten (12 per cent) would close their business on selected days of the week.

The energy expert encouraged pubs to consider fixed term deals over flexible rates to potentially “protect against price hikes” in an increasingly volatile market, and to make sure they secured new contracts as soon as possible. 

“For pub businesses with energy contracts coming to an end, they’ll get a better deal the sooner they act. Forgetting to secure a new contract can add eye-watering costs to overheads that may push pubs over the edge,” Arthur said. 

When approached for comment, the Government confirmed it would announce new support measures for businesses at a lower rate, but failed to specify when this would be.

A Treasury spokesperson said: “We are currently carrying out a review with the aim of reducing the public finances’ exposure to volatile international energy prices from April 2023. We will announce the outcome of this review in the New Year to ensure businesses have sufficient certainty about future support before the current scheme ends in March 2023.”