UK pubs hit by higher energy costs as suppliers limit exposure

Energy suppliers are refusing to renew gas and electricity contracts for pubs or forcing publicans on to higher rates while they renegotiate terms, as they limit exposure to a sector still facing huge uncertainty after a year of on-off lockdowns.

About 30,000 pubs are facing contract renewal rejections or more expensive off-contract tariffs, the British Beer and Pub Association (BBPA) estimates.

Harry Webb-Jeffries, who took over the Valiant Sailor pub near Folkestone in Kent five days before the second national lockdown in November, said he had been refused contracts by every big supplier except Utilita and he was now paying £400 more a month for energy than the previous tenant.

Garry Tallent, landlord of the Red Lion in Chobham, Surrey, said he had been rejected by Eon after the German supplier said it was no longer taking on new hospitality businesses. He was accepted by Utilita but his rates increased and were barely covered by government coronavirus grants.

“After rent, utilities is our biggest bill,” Tallent said. “We’re just keeping going on a wing and a prayer.”

Gerry O’Hara, operations director for broker Nationwide Energy, said that because of the debts many pubs had accrued while closed, suppliers were unwilling to offer them contracts or had increased their rates. “The more you owe, the higher per unit rate they charge,” he said.

Admiral Taverns, which owns 1,000 pubs, said it had stepped in to negotiate energy rates for some tenants as suppliers saw larger businesses as less of a risk.

The problem is common among independent hospitality operators but is particularly acute for landlords, many of whom live above their pubs, with their domestic energy supply combined with that of the business.

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The BBPA said that it was lobbying Ofgem, the energy regulator, to investigate why suppliers were refusing renewals and to push them to agree long-term repayment plans.

Several energy suppliers, including British Gas, Eon and Utilita, admitted they had stopped accepting new customers from hard-hit sectors such as hospitality as they dealt with a surge in bad debts from existing customers. Many energy suppliers — even some of the largest companies — are lossmaking and operate on thin margins.

Suppliers also pointed out that utility bills were rising for households as well after a surge in wholesale electricity and gas prices in recent months.

Eon said it “had to make changes to how we operate in order to manage the higher risks we face in a market where margins are already wafer-thin”. It added that it had stopped accepting new customers in certain sectors because of the level of risk and “the cost of selling energy back to the wholesale market for customers not consuming when their businesses were shut”.

British Gas, which has more than 4,000 pub, bar and restaurant customers, said it had been “slowly relaxing restrictions for some of our products for new customers”. Its parent company, Centrica, said last month that losses at its business division widened to £140m last year from £20m in 2019 as it had to account for higher bad debts.

Utilita said it had quoted some renewals at a higher figure “due to a number of factors, including the rising price of energy” but insisted that more than half of its commercial customers “are renewing with us, with thousands staying on cheaper rates”.

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Ofgem said energy suppliers offered contract terms “which take into account several factors, including risk of default”.

“We continue to encourage customers to explore the market for offers most suited for them,” the regulator added.



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