Energy costs ‘biggest threat’ to pubs’ viability, report finds
The new report from Frontier Economics flagged that energy costs were still hitting businesses hard and rises post-March simply could not be guarded against and would be ‘crippling’
Energy bills returning to their regular rate post-March would put pubs and brewers at a loss of 20% on average, according to a new report by Frontier Economics, produced for the British Beer and Pub Association (BBPA).
The report found that energy costs were currently the biggest threat to their viability, and would be “even more lethal” when the relief scheme ended in April. This was on top of cost inflation across other parts of their businesses food and drink, to key commodities and wages were contributing to profit margins being erased.
Based on “extensive” analysis of industry reports, accounts and interviews with pub operators and brewers as well as a full review of the wider economic context from August to October 2022, the report noted how businesses had already made changes to mitigate against cost inflation where possible; from changing menu options to reducing opening hours.
It also flagged that energy costs were still hitting businesses hard and rises post-March simply could not be guarded against and would be “crippling”.
The report – produced in advance of the Autumn Statement – also explains different routes for intervention from the Government to save businesses from closure, from extending the energy support package to reform of the business rates system.
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.”
He added: “Aside from the report, 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.”