Hospitality businesses report utility bills ‘shooting up'

Hospitality businesses are reporting significant inflation in their utility bills, putting further pressure on the sector and a "drag on recovery".

Dave Critchley, executive head chef at Lu Ban bar and restaurant in Liverpool, told The Caterer he had seen a 25% increase on his bills on top of the increasing costs of ingredients, staff and VAT, which rose from 5% to 12.5% this month and is due to return to 20% in April 2022.

Critchley said: "Our business, which is already on a tightrope with last year's rent still to pay, is now seeing big increases on rates, as well as cost of ingredients due to Brexit and drivers. It's adding even more pressure to businesses who are dealing with legacy debt, increases in NI contributions and the raise in VAT, all at the same time."

He added: "At this rate pretty soon hospitality will not be sustainable anymore."

Some businesses have seen their utility costs almost double, including Charles Tyler, director of Paladar restaurant in London's Southwark. The venue's electricity contract came to an end last month and while he was previously paying approximately £500-£700 a month, he expects this to rise to around £1,100-£1,300 a month under the new contract.

"Anybody whose contract is going to end in the next few months is going to suffer a significant increase because I don't see energy prices going down this winter. Fingers crossed they might next spring," he said.

"Energy costs are not an enormous percentage [of overall costs] – staffing costs are more of a concern, frankly – but it's just another thing. Staff, food, drink costs – and availability – and now this as well."

He has taken a one-year contract in the hope that prices will have fallen by next summer but in the meantime, he expects to have to increase prices at the restaurant next year.

"I think that all restaurants are going to have to increase prices. I can't see how they can't, under the current circumstances and the way things are going," he said.

Kate Nicholls, chief executive of UKHospitality said: "The rise in utility costs, with price rises for new contracts at over 50%, puts further pressure on hospitality businesses facing a perfect storm as we head toward the key festive trading season. Along with acute labour shortages and supply disruption, it's another drag on recovery that operators must navigate. It's crucial that government introduces a permanent lowered rate of VAT at 12.5% and continues to support the industry where it can as we grapple with these challenges and look to repair balance sheets."