Employment

Cafes, pubs and restaurants are already being hammered by sky-high energy bills

Faced with unpayable energy bills and no corners left to cut, some businesses have already been forced to close.

Co-owner of board game cafe The Ludoquist Nick Smith 'hasn't really slept' since receiving a quadrupled energy bill. Image: Nick Smith

Households across the country are preparing for another devastating rise in energy bills this autumn but pubs, cafes, restaurants and other small businesses are already feeling the impact.

With no price cap for businesses, energy-intensive hospitality companies have seen bills quadruple. In one case the Big Issue has heard of, a business was forced to close completely after its gas bill rocketed 10-fold.

Costs for SMEs have reportedly nearly doubled in the three months to June, and research from small business insurance provider Simply Business found half have been forced to raise their prices.

With everything including the cost of ingredients rising, one in five businesses intend to raise prices by 6 to 10 per cent, and for almost one in 10 business owners prices may need to go up by as much as 20 per cent.

Two in five are also holding off opening new or additional premises in the next six months according to the research, and half said they are unlikely to hire any additional employees.

Nick Smith, co-owner of The Lundquist board game cafe bar in south London is facing energy bills hiked from £1,000, to a staggering £4,000. That’s an extra £36,000 year. 

“We’re open late at night when it’s cold, we have lots of lights, we have freezers, ovens,” he explained. “No one’s going to come to a cold cafe.”

Despite being based around a more traditional type of fun, the Ludoquist is an energy-intensive business with lights, heating and ovens to run, says co-owner Nick Smith. Image: Nick Smith

Smith described receiving the newly quoted bill, saying: “My stomach fell out and I haven’t really slept since.”

It would be a “very difficult decision to make” but Smith admits he may need to lay staff off to cope or close up earlier. The majority of the cafe’s staff are in their 20s or 30s and rely on it as their sole income. 

The quadrupled energy bills will start arriving in January, so they’re hoping for a bumper Christmas to cover some costs, but as Smith says: “Unfortunately that will be at a time when customers will be seeing big bills themselves.”

Households will see bills rocket again when the energy price cap rises in October by a startling 70 percent, having already increased by a massive 54 per cent in April. The cap, set by regulator Ofgem, puts a limit on the maximum price energy companies can charge for electricity or gas.

But with no cap for businesses, sky-high bills are already forcing them to close.

The Royal Crown Chinese takeaway in Aberdeen saw its last day of trading on Sunday, saying its quarterly gas bill rose from £900 to an incredible £10,000. 

“It’s an exceedingly sad Sunday as we prepare to lock the doors for the final time tonight. We’re one of the first local businesses in Aberdeen to be forced to close, we won’t be the last something needs to be done!” wrote employee Natalie Hood on Twitter. 

The small, family run business had been serving locals since 1982. 

The energy price cap was originally introduced because the Competition and Markets Authority (CMA) found some homes were being charged excessive prices. It wasn’t introduced for businesses because the CMA did not find evidence of this happening in the business sector at the time, the government has said.

Kate Nicholls CEO UK Hospitality said not having a price cap “will see many facing soaring bills eliminating profits and viability in hospitality”. She called for “urgent action” to help manage the crisis, saying: “We are not going to get a grip of cost of living until we tackle cost of doing business.”

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A windfall tax on oil and gas companies like Shell and BP was brought in by former chancellor Rishi Sunak, who described the tax as a 25 per cent Energy Profits Levy

The tax is expected to raise about £5billion in its first year which will be used to to help households struggling with soaring energy bills. But for Smith, financial relief has been “very much focused on the consumer,” with businesses largely neglected from the government’s cost of living strategy. 

Labour has proposed a “£1bn fund to help energy intensive industries with the higher cost of energy”, as well as giving small and medium businesses a discount on their business rates bill.

Comparing support that was provided for small businesses during the pandemic with the scale of the intervention now needed to save struggling businesses, Smith at the boardgame cafe said: “A one off payment of a few grand… isn’t going to do it, because that’s just one month.”

“The government needs to do something dramatic,” he continued. “I’m not entirely sure that the politicians have a full comprehensive understanding of the scale of the disaster that’s gonna hit the economy next year.”

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