Unless the Government intervenes to help hospitality businesses with soaring utility bills, thousands could be forced to close over the next few years.
The stark warning comes from Regency Purchasing Group, one of the UK’s leading procurement businesses, which says the hospitality sector is now in the midst of a ‘perfect storm’.
Regency Purchasing Group, based in the South West, says food and drink costs have increased, there have been supply chain issues and minimum wage has increased, all of which have contributed to the ‘perfect storm’, with many smaller hospitality businesses already operating within very tight margins.
Managing Director Alex Demetriou said: “Until recently, a typical pub was spending around £2,000 per month on utilities, but businesses renewing their contracts are seeing their monthly costs increase to around £7,000. That is an extra £60,000 a year, on utility bills alone. Many village and community pubs do not make £60,000 profit in a year, so the utility bill crisis alone is the difference between making money and losing it.
“In addition, pubs that serve food are seeing further challenges with not being able to recruit the staff they need, forcing them to close their kitchens, either for several days a week or, in some cases, closing them entirely. A number of our members have told us they are now making plans to close their businesses when their utility contracts are up for renewal later in the year.
“It’s a bleak picture today with the number of businesses that have closed or are struggling, but the situation is set to worsen further with hundreds of businesses now forward-planning their closures in line with forthcoming utility renewals. Unless the Government intervenes, I expect hundreds of hospitality businesses to close by the end of this year, and it could be thousands within a few years.”
He said Brexit, which has been somewhat overshadowed by the pandemic, has had a huge impact on the hospitality industry’s ability to recruit the required numbers of staff.
Regency Purchasing Group has been supporting its growing customer portfolio by securing the most competitive pricing for food and drink, but in recent months the procurement experts have found themselves spending more time taking a more holistic view of businesses, including utility costs.
But Mr Demetriou warned that, ultimately, the Government needs to step in to give hospitality businesses any chance of weathering the storm.
He said: “The price cap in the UK is used by OFGEM to protect the consumer, not businesses. A lot could be learned from France, where there is a Tarif Shield which protects both private and professional consumers from excessive increases in utility bills.The news and media website Vie Publique says this tariff limits increases to 38 Euros per year for private customers and 60 Euros per year for professionals.
“Without these measures, the regulated tariff would have risen by 330 Euros per year for private customers and 540 Euros per year for professionals. Our whole country runs on utilities and it’s going to take a collective approach to ease the growing pressures on businesses, but that approach has to start with some significant Government intervention.”
With the UK’s largest network of field-based procurement managers, Regency works with nearly 4,000 businesses throughout the UK, including some of Britain’s biggest and best-known leisure attractions, hundreds of golf clubs, plus pubs, hotels, zoos, farm attractions and many others.
Regency specialises in sourcing products, supplies and services from various markets, locally, regionally, nationally and internationally. Find out more at www.regencypurchasing.co.uk.
