Governments in Holyrood and Westminster have today been urged by the NTIA to take “bold and decisive” steps to prevent a catastrophic failure of the hospitality and late night economy sectors.
Small businesses have seen such high energy cost rises over the last few months that the situation is now unsurvivable for most without immediate and large scale intervention.
Unlike domestic energy users, who have seen unit prices double over the last 12 months to the current price cap of 28p per Kwh, businesses do mot benefit from the energy price cap and so are fully exposed to unlimited rising energy costs, resulting in unit charges increasing from an average of 15p per KWh over the last few years, to a shocking 90p or more per KWH today. An increase of around 600%.
For small but energy intensive businesses such as cafes, pubs, clubs and restaurants who might previously have seen annual energy bills of around £20,000, this complete market failure would result in annual bills of £120,000 or more, which if allowed to continue would put most into immediate insolvency.
Worse still, commercial energy users have far fewer legal protections, so suppliers are adding to the financial pressures for many industries by imposing unviable commercial terms. It is now common to see unfair terms such as 6 months security energy deposits to engage with new contracts, or imposing absurdly high out of contract rates while refusing to provide new contracts, a situation that is unsustainable given there are now virtually no energy providers willing to take on new contracts for hospitality or night-time economy businesses.
The NTIA is calling for both UK and Scottish governments to take bold and decisive action with a strategy that saves the sector:
- UK Government should reduce VAT to 12.5% or lower for all hospitality sector premises with immediate effect
- Scottish Government should pass along the full 12 months of 50% rates reduction for this financial year that has been given to businesses south of the border and already been funded by the Treasury for businesses in Scotland, rather than only the 3 months support given by Holyrood which has now expired
- Government must include small businesses in the domestic energy price cap, with small business energy prices frozen at no higher than the current domestic price cap of around 28p per KWh
The NTIA is also urging both governments to immediately consider any other measures that could mitigate harms already experienced, including flexible or deferred payment schemes for taxes such as VAT and PAYE, direct grant funding, and the pause of any legislative measure which could add cost or reduce trade at this time of national crisis.
Mike Grieve, Chair NTIA Scotland said:
“With many hospitality businesses already operating on reduced hours due to post lockdown pressures, including the recruitment crisis, inflation, increased wage costs, rising wholesale prices and the overall cost of living crisis, the current situation where energy costs are spiralling completely out of control threatens the very existence of our industry across the U.K. Without urgent intervention from both the U.K. and Scottish Governments to provide direct help to businesses, and to impose an affordable cap on energy, there will be little or no nightlife or hospitality left in our town and city centres within a matter of months.
This existential threat not only impacts business and employment and therefore livelihoods, but potentially devastates the rich cultural fabric of our towns and cities. “
Gavin Stevenson, Vice Chair NTIA Scotland said:
“The trickle of business failures over the summer has now become a raging torrent of business failures. Small businesses are making irreversible decisions today on downsizing, mothballing, partial closure, or sadly, closing their doors forever and declaring insolvency. Annual energy costs under the pricing available now are simply unsurvivable for most small businesses, and it is long past time for government to act quickly if we are to save jobs and protect the future of the economy. We have now reached such a crisis point that only immediate and large scale interventions can save the sector, with substantial cuts to VAT, additional support with business rates, and inclusion of small businesses in the domestic energy price cap all now required if small businesses are to survive.”
