After pandemic, UK pubs now suffer from rising energy prices

First, it was the novel coronavirus pandemic that forced bars to close and rely on government support to survive the business collapse. Now, the UK’s iconic bars say they are battling an even bigger threat: rising energy prices.

Chief executives of the top six bar and brewery companies are warning that rising bills for electricity, heating and other essential supplies could force many bars and craft breweries to close, leading to a wave of job losses as the country prepares for a recession.

“Across all our businesses, we are witnessing price increases that are causing irreversible damage,” they wrote in a letter to the UK government asking for immediate help.

“Walks can now be over 300% on pre-pandemic energy bills, with the current average increase of around 150% in the beer and pub sector putting jobs and businesses at risk.”

Nick Mackenzie, head of the Greene King pub chain, said one place he works with reports that energy costs have increased by £33,000 ($38,744) a year. “While the government has introduced measures to help households deal with this rise in prices, companies are having to face it alone, and it’s only going to get worse in the fall,” Mackenzie said.

Some pubs were getting more than 400% price increases on year-long gas supply contracts, while others found it impossible to secure contracts, said Kevin Georgel, CEO of St Austell Brewery. “The cost of energy threatens to cause mass business failure and the loss of thousands of pubs across the country,” he added.

UK energy regulator Ofgem announced last week that household bills would rise by 80% to an average of £3,549 ($4,159) a year from October. CEO Jonathan Brearley said Britain’s next prime minister would need to take immediate action when he takes office next week to limit the fallout.

“The answer will need to match the scale of the crisis that we have before us,” he said.

Expect the situation to get worse before it gets better. Energy markets are extremely volatile as traders consider whether Russia could completely cut gas flows to Europe once the weather cools and more energy is needed. The UK also has less gas storage than the rest of Europe, which has been stockpiling supplies.

This is alarming about the eye-watering costs for families next year. But companies say they are not getting enough help either, stressing that the crisis will leave many on life support.

“Small businesses are sidelined when it comes to energy bills, with the vast majority excluded from the home energy price cap and other protections designed for home consumers,” said Martin McTague, who leads the Federation of Small Businesses in a communicated last week.

“Unlike large corporations, small companies cannot cover costs and negotiate agreements with their large energy suppliers. Many of our members say energy bills could be the last nail in the coffin as they struggle to get through the winter,” he continued.

For British pubs, it’s yet another reason to worry about the future. For years, the industry has struggled as people abandon drinking in bars, restaurants and their homes. Then the pandemic arrived and the government ordered bars to close for the first time in the country’s history. The pubs remained open during World War I and World War II to boost morale.

Now, business conditions are deteriorating again.

“The UK brewing industry is facing a much more serious crisis than the one we have faced during the Covid lockdowns of recent years,” said Paul Davies, CEO of British brewery Carlsberg Marstons.

He noted that gas and energy costs have nearly tripled since 2019 — and it’s not the only expense rising. The price of malt, a key ingredient in beer, has doubled and aluminum costs have increased by more than 50%. Brewers are also worried about carbon dioxide supplies after one of the UK’s biggest producers closed a factory because of rising energy costs.

There were 39,973 pubs in England and Wales in June, the lowest level on record and a decline of more than 7,000 locations since 2012, according to an analysis by the Altus Group.

The property consultancy said that while pubs have been “remarkably resilient” during the pandemic, despite deep uncertainty, the energy crisis and inflation are creating “new headwinds”.