Pubs and the unsustainable rise in costs
Many pubs and bars have expressed the fear that they will face closure unless the Government steps in and helps with the rising cost of energy, which is also resulting in the closure of C02 factories, a key ingredient in making beer and cider. But not only that, customers will be strapped for cash, resulting in the potential loss of customers, resulting in the not so perfect storm.
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It is estimated that seven in 10 pubs believe they will not survive the rising cost of living and increasing energy bills, according to the Morning Advertiser. A further 8% of pubs said they had an increase in utility costs of more than 500% and 65% had an increase of at least 100%.
Worried business leaders from across the brewing and pub industry signed an open letter to the Government warning small businesses will close and jobs will be lost if immediate action isn’t taken on energy bills for businesses.
The most recent letter, sent on 26 August, signed by six business leaders, warns that pub and brewing businesses across the UK are at risk of closure due to out of control energy bills, with upwards of 300% price hikes reported with current average increase around 150% across the beer and pub sector.
In this plea for help, the six business leaders highlight that not only is it an energy and supply issue, it is also an issue that affects the production of beer and cider which is impacting the “entirety” of the industry’s supply chain. The British Beer and Pub Association (BBPA) has warned there are “serious concerns” surrounding the closure of a CO2 manufacturing plant as it will impact the supply of CO2 to the brewing and pub industry.
CF Fertilisers UK, a subsidiary of CF Industries Holdings, announced on 24 August its intention to temporarily halt ammonia production at its Billingham Complex due to market conditions. At current natural gas and carbon prices, CF Fertilisers UK’s ammonia production is “uneconomical”, with marginal costs above £2,000 per tonne and global ammonia prices at about half that level.
As operational costs rise, we can only begin to imagine the crisis pub and bar owners are facing. On top of energy costs pubs also need to think about staff salaries, cleaning costs, repairs, insurance, bank charges, equipment hire, business rates, utilities, professional fees, and even miscellaneous costs such as buying plants for the garden, newspapers – all which have also increased in cost.
A landlord of one pub in Essex told the BBC that his energy costs had risen from about £13,000 a year to £35,000 which means that the pub has to generate a further £1,800 in takings per week to cover the costs.
Paul Berry, owner of gastropub The Swan and a restaurant called Spelt in Bampton, Devon, told The Telegraph that a single haddock was costing £4 alone and then when you take into account everything else needed to complete a dish of fish and chips and charging £15 – “you’re not really making any profit.”
The cost of running such an establishment isn’t sustainable anymore, last week BrewDog CEO James Watt announced it is set to close six of its sites amid rising costs and has called on the government to “get a grip” and provide assistance to the sector. In a LinkedIn post, Watt said that there has been “no prospect of any help” from the “clueless” Government to help tackle the current onslaught of rising headwinds.
As bigger and established companies begin to reduce its offering, smaller businesses will be hit hardest. Traditional pubs that have been running for centuries, surviving some of the toughest situations, may not be able to face this giant hurdle if the Government doesn’t step in to bargain with the energy bosses.
