The announcement last week that the energy price cap was going up by 80% for domestic users from October has caused widespread panic and alarm, but what are the implications for pubs and other businesses, who are offered no cap on their bills. With a host of other pressures on their running costs, there is a lot to be concerned about....
Sadly though, that sort of price and beyond is likely to become the norm over the coming months as our breweries and pubs brace themselves for the impact of higher energy bills that will make the average domestic bill look like loose change. According to the Society of Independent Brewers, some of their members have been quoted a cost that doubles or triples their existing bill, with one operator saying they had been quoted a new price 6 times that of their current contract for their energy. With hikes of that size it is inevitable that brewers - those that can survive - will have no option but to pass this on via the price the pubs pay for their beer.
The cost of energy is bad enough, but it is not the only issue affecting the cost of a pint. Only a few months ago, following the demise of the Beatnikz Republic brewery in Manchester (to be followed shortly afterwards by Sheffield's hugely influential Kelham Island), I wrote about the pressures facing the brewing industry. These included increased grain costs exacerbated by the situation in Ukraine, plus increases affecting packaging, labour, and distribution, alongside already higher energy costs. Paul Greetham, CEO of Beatnikz Republic, also said the company had never got over the impact of the COVID lockdowns. Other issues are a shortage of some hops due to poor harvests which have forced prices up, which of course can happen in any year, and a potential shortage of food-standard carbon dioxide due to the temporary closure of the Billingham plant run by the UK's only producer, CF Industries. Worryingly though, the indications are that against this background and with energy bills set to climb and continue to do so through 2023, the impact on pubs and breweries, along with other businesses and institutions, is going to be much, much worse than the pandemic.
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| Pressures building on breweries |
So, what are the other pressures facing our pubs and bars? The afore-mentioned energy costs, either direct to the pub or via their pub owner which may well result in increased rents. The cost of the other drinks they sell, as just like the brewers, their producers are facing increased input costs. The cost of the food they sell, with food inflation running into double figures at the moment. The cost of staff, if they can get them, with the hospitality industry in many parts of the country running with high staff vacancies. Every step along the way, the costs are climbing. And so faced with all these challenges, what can pubs do?
In an interview in The Guardian at the weekend, Ian Ibbetson, landlord of the New Clarence in Hull (pictured above), said he was charged £9,000 a year for energy when he took over the pub in September 2020, which then rose to £21,000 when he renewed it in November 2021, and fears that now with his contract up for renewal it will double again. He has already reduced staff hours, and says that he won't renegotiate the lease for the pub until he knows how much he will have to pay for his energy. He wants to make the New Clarence a thriving community pub, but he acknowledges that he has to run the business with his head, not his heart.
And what about those customers? There's likely to be less of them, for a start. As we start to get into autumn and the new energy bills start to land the amount of money people will have to spend on going out will be reduced. Some will go out less, some not at all, but the net result will be that the number of people on any one day going to pubs will be reduced, particularly if they are having to pay significantly more than they used to when they get there. So with less people going to the pub, the pub's income will be reduced. In order to cover their fixed costs - energy, rent, taxes - they will be forced to put their prices up, or reduce staff, or reduce what they sell, stop paying for Sky TV, or reduce the hours they open, or a combination of these and anything else they can in order just to stay afloat.
The government did of course step in during the pandemic to support the industry, but with them having effectively been in absentia in recent months there has been no meaningful comment from them during this period to give any indication as to whether they will help this time, and I have to say I sense that any forthcoming assistance will be too little and too late. This week, in an open letter to the government, six pub and brewing groups - JW Lees, Carlsberg Marston's, Admiral Taverns, Drake & Morgan, Greene King and St Austell Brewery - called for urgent intervention, including a support package and a cap on the price of energy for businesses. CAMRA too, as the most successful consumer organisation in Europe should also be banging the drum for the industry, as it has done so many times and effectively in the past. As has been said so many times, pubs are the beating heart of the community, pull people together, and in times of shared hardship they are even more important in providing a refuge and some relief from the pressures of the world outside, but without any support, the industry is likely to see some significant losses across both pubs and breweries.
Over the past few days though, there has been little indication of any impending doom to be found on the streets of Halifax, and likely the same scenario was played out in towns and cities up and down the country. The final Bank Holiday of the weekend before Christmas and the imminent end of the summer holiday period brought people out in droves, determined to have one last hurrah before the autumn hits us. All weekend the town was busy with the IndyFax Beer Festival bringing people to the town's independent bars, whilst events at The Piece Hall over the weekend drew large numbers. The IndyFax had somewhat crept up on us and when I called in Kobenhaven on Friday evening they had a number of beers on from Leeds brewery Anthology including a hoppy pale brewed in collaboration with the bar called Face the Fax. Although it had not been organised for the festival, having been set up months earlier, Dukes had had a tap takeover by Brighton-based craft brewers, Unbarred, and I was interested to try a couple of their beers when I called in the same evening as I had never come across any before on draught. I normally work on a Sunday afternoon at The Meandering Bear on Union Street and even allowing for some of the stints I have done when the likes of Paul Weller and Tom Jones have been performing next door at The Piece Hall, it was the busiest shift I have worked there, it was non-stop from start to finish! Over by the Town Hall, the Bear's sister bar, The Grayston Unity, had been busy all weekend with Huddersfield indie rock band Kelter entertaining a full-capacity crowd inside on Friday evening, with local ska band The Owter Zeds playing to a huge crowd outside on Sunday afternoon.
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| Calm after the storm: Meandering Bear, Halifax |
Last night, I ended up doing what a lot of people do on a regular basis, watch football in the pub. I had wandered across after my tea for a couple of pints at The Dusty Miller in Hove Edge, near Brighouse. The pub was busier than normal particularly considering the usual post-Bank Holiday lull, but it turned out that BT Sport were showing the Premier League match between Leeds United and Everton. Plenty of Leeds fans were in attendance, with the solitary Everton supporter behind the bar serving their drinks, and needless to say the banter was flying. I ended up staying and watching the game, a keenly-contested and at times feisty 1-1 draw, enjoying the fact that I could relax as my team wasn't involved. Elsewhere in the pub, they had also been busy serving food, a group of girls were enjoying a bottle of wine whilst earlier guys had popped in for an after-work pint. All scenes that could be played out anywhere across the country.
Lots of well argued points there, Chris.
ReplyDeleteI remain positive about the future of pubs, because I can't be negative, but last night in Sheffield several pubs were closed for the day and the classic community pub I popped in had just two other customers the half hour I was there for a couple of (£3.10) pints.