New energy scheme could cost hospitality £4.5 billion

THE UK Government’s new Energy Bills Discount Scheme, announced yesterday, could see bills for the hospitality sector increasing by a total of £4.5 billion across the UK, trade group UK Hospitality has warned.

The group said that the new scheme ­– under which businesses will receive a discount on the wholesale price of energy, rather than the current price cap – will make prices ‘simply unsustainable for many’.

The new scheme will run from 1st April 2023 to 31st March 2024, with businesses receiving a discount of ‘up to’ £6.97/MWh on their gas bills and ‘up to’ £19.61/MWh on electricity.

Businesses in manufacturing sectors will receive higher discounts.

Announcing the new scheme, Chancellor Jeremy Hunt said the government’s priority is ‘taking difficult decisions to bring down inflation while giving as much support to families and business as we are able’.

“Wholesale energy prices are falling and have now gone back to levels just before Putin’s invasion of Ukraine,” said the Chancellor.

“But to provide reassurance against the risk of prices rising again we are launching the new Energy Bills Discount Scheme, giving businesses the certainty they need to plan ahead.

“Even though prices are falling, I am concerned this is not being passed on to businesses, so I’ve written to Ofgem asking for an update on whether further action is needed to make sure the market is working for businesses.”

However, UK Hospitality chief executive, Kate Nicholls, said the new scheme will result in the sector paying billions more for energy compared to the current – already greatly increased – prices.

“This will simply be unsustainable for many,” said Nicholls.

“With no further, dedicated support for a vulnerable sector like hospitality, I’d urge the government to consider other measures it can take to help the sector.

“For those suppliers to hospitality in the wider food and drink sector that have received additional support, we expect them to support the sector accordingly in their pricing.”

Nicholls added that a review of the non-domestic energy market by Ofgem should “serve as a wake-up call to suppliers that now is the time to be reasonable with the quotes they’re offering and to abandon unfair demands of businesses to secure fixed deals”.

“This is an extremely challenging period for the UK’s hospitality sector, which is so important to the economy and communities, and it’s essential the sector gets through it as best it can,” she said.

“If it does, I’m confident we can reach a situation where hospitality will return to generating economic growth, delivering hundreds of thousands of jobs, and investing in Britain’s high streets and communities. This is all while it contributes billions to Treasury revenues.”