Publicans warn of 'huge threat' due to 'doubling and tripling' of energy bills

LAST UPDATE | 30 Aug 2022

IRISH PUBLICANS FEAR the rising cost of winter energy bills, as UK publicans flag today that they might need to close due to costs.

The bosses of six of the UK’s biggest pub and brewing companies signed an open letter that urged their government to act on the rapidly increasing cost of energy bills. 

Greene King, JW Lees, Carlsberg Marston’s, Admiral Taverns, Drake & Morgan and St Austell Brewery all signed the letter, which was published today. 

They say that pubs and brewers in the UK are at risk of closure within months due to price hikes of upwards of 300%.

On Friday, the UK regulator Ofgem confirmed that bills for an average UK household would surge by 80% in October when a new price cap comes into force.

Nick Mackenzie, chief executive officer of Greene King, said one tenant has seen their energy bill jump £33,000 for the year.

Irish price hikes

Here in Ireland, energy bills have also been rapidly increasing, with SSE Airtricity, for example, announcing gas and energy hikes that could add over €1,000 to the combined annual cost of bills. 

Environment Minister Eamon Ryan is before an Oireachtas committee today to discuss energy security amid concerns about electricity supply this winter.

Speaking to The Journal yesterday , Daragh Cassidy of price comparison website Bonkers.ie said that while Ireland’s prices may not jump as high as the UK’s, they are currently at similar levels.  

Donal O’Keeffe of the Licensed Vintners Association told The Journal this morning that the two biggest challenges for his members right now are finding enough skilled staff, and “dealing with the extraordinary unprecedented increase in energy costs”.

Pubs and restaurants can be very big users of electricity, due to the need to chill and cook food, for example.

“We are hearing repeated reports of pubs facing a doubling and tripling of their energy bills over the last few months,” he said. This is squeezing the businesses’ margins and added a “ferocious expense” for them. 

The LVA met with Paschal Donohoe, the Finance Minister, and Michael McGrath, the Minister for Public Expenditure and Finance, last week about the issue.

“There was a long discussion about the need for government intervention and government assistance for small businesses on energy costs,” O’Keeffe said. “We have seen the government help out households and individuals, which was very welcome  – now they need to put a package in place for SMEs [small-medium enterprises] and for the hospitality sector in particular.”

The LVA is looking for the government to put in place a grant assistance scheme for the hospitality sector, and to put some stability measures on pricing in place, such as a price cap or other mechanism. “We do need clarity and stability on pricing – we can’t cope with prices as they are,” said O’Keeffe. 

Energy prices have already been increasing and are set to increase even more as winter comes in, leading to major fears among hospitality owners about what’s ahead. 

“Right now as it stands today, the impact of the energy cost is the squeezing of margins,” said O’Keeffe.

Most progressive businesses have taken steps to make sure they are reasonably energy efficient. Long-term there needs to be a furthering in the retrofitting schemes and energy efficiency scheme.

He said that the government needs to ensure there are measures in the forthcoming 2023 Budget, to be announced at the end of September, to help hospitality businesses deal with the increased energy costs.

Asked if there are fears around pub closures in Ireland, O’Keeffe said:

I don’t think anyone is talking about closure. There are concerns about where it goes into winter and next spring. There has been a doubling to tripling of energy costs so far, so it would be a huge threat if it goes 30 – 50% more, there would be serious viability problems.

He said that each business will have to judge themselves how to deal with the costs, but some are looking at the prices they are charging customers, particularly businesses that are very energy intensive. 

“Ultimately the business has to be profitable to survive,” he said. “There is real concern: where does it go from here?”

Pubs are already trying to recover from the “extraordinary crippling impact” the Covid-19 pandemic and lockdowns had on the pub trade, though O’Keeffe said that his members have been pleased by their level of business since reopening this year.

“There are plenty of pubs in a weakened financial position after two years of closures,” he said. “We fully believe the government understands the seriousness of the issue and we are waiting to see what they are gonna bring forward in the Budget.”

Squeeze yet to be felt

A spokesperson for the Vintners Federation of Ireland said that because publicans are coming out of the summer period, “a squeeze on energy costs has yet to be really felt”.

They added that winter will only add to energy consumption.  

“The trouble is coming down the track and coming on really quickly; people are getting a sense of where we are going with this. It’s hard to get your head around how big the increases are going to be.”

In September 2021 the VFI had a deal with one of the energy suppliers for 14.73c per unit of electricity – that rate is now 64c per unit cost. 

That’s what we are facing into – that’s what our members are facing into, unbelievable price rises.

One member of the VFI said he had experienced an 85% increase in his energy costs compared to last year. He had spent his entire energy budget for 2021 by the end of July 2022.

“He is facing more increases so he thinks by the end of this year his energy costs will increase 230% on 2021,” said the spokesperson.

The VFI said that publicans are also worried about the mooted idea by Green Party leader Eamon Ryan of bringing in premium pricing for anyone using energy from 5 – 7pm, “which would be a hammer blow to the hospitality sector”.

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Asked about whether the VFI thinks its members might close their pubs, the spokesperson said: “What we are going to be looking at is pubs closing maybe Monday to Thursday, maybe some publicans deciding they are going to be closing for the entirety of the winter. And if energy bills are going to be as big as we think they will be, some pubs will close.”

The VFI also met with Donohoe last week to outline its concerns. It believes some government intervention will be required, whether a cap on prices for small businesses or a grant scheme, for example. 

“We’re agnostic as to what the intervention will be – we just know given the potential of these increases it is going to have to be something substantial.” 

Restaurant pressures

Pressure is also being felt by restaurant owners, Mike Ryan of Coqbull and Cornstore in Cork and Limerick told The Journal. 

He said that the Cornstore in Cork is up €70k on the last year on the cost of energy bills alone, while Coqbull is up €45k. 

“To be honest I’ve never looked at energy consumption so closely and it’s shocked me,” he said. “We’ve known this was coming down the tracks. I know sometimes you get sensationalist headlines but I’ve been speaking closely with our whole team, as in the operational team, for the last couple of weeks now and there are times that we’re going to have to target energy consumption.”

He said that while people might assume there are big profit margins in the restaurant industry, that isn’t always the case – particularly after the pandemic.

“There has to be action – there has to be positive action,” he said, adding that the energy crunch is affecting people in business but also those in households, so everyone should be helped when it comes to energy supports. 

“We need to have a positive message coming out that businesses know that there is going to be help and support.”

Ryan said that there is only so much energy inflation, and general inflation, that businesses can absorb before they have to “make difficult decisions”. These decisions could be with regard to the labour force, or opening hours, for example.

“Business are not afraid right now to make tough decisions with targeted opening hours,  because if we’re not proactive then we won’t be open next year,” said the business owner. He suggested some restaurants might find themselves only opening when they know they will be busy. 

“We are on the rise of inflation – we haven’t hit the peak,” he added. Ryan said the government needed to also ask why energy companies are making such high profits right now, and how that is being accepted. 

- Additional reporting from PA