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Hospitality firms at risk of closure without support

More than 70% of hospitality businesses will be “financially compromised” within weeks amid soaring costs, with the industry demanding an emergency support package.

Hospitality
Late-night operators are facing huge energy bills

According to trade group the Night Time Industries Association (NTIA), rising cost inflation has resulted in 70% of survival rates for the night-time economy and hospitality business being slashed from months to weeks.

Michael Kill, CEO of NTIA, said: “Over the last three weeks we have seen an escalating public presence of closure notices from pubs, bars, restaurants, venues and clubs across the UK, with more than 70% of businesses stating they will be financially compromised within weeks, all of which have stated untenable operating costs as reasons too close.”

As such, more than 6,000 businesses across the night-time and hospitality sectors have sent letters to MPs to ask for financial support.

The sector is calling for a reduction in VAT, an extension of business rates relief and an energy cap for smaller firms.

The NTIA said profit is being destroyed by increased operating costs, with more than 65% of businesses barely breaking even or losing money.

The trade body and key stakeholders in hospitality have been in talks with government ministers and leadership teams on the need for an emergency relief package for the industry.

The NTIA cited several examples of soaring costs for the industry, with a 400-capacity nightclub in the South East of England reporting that its energy tariff tripled within the last few months. It also revealed an increase in staff costs from 26% to 32% of turnover.

Meanwhile, a Scotland-based pub operator saw energy costs climb from £31,000 (US$35,653) in 2021 to £86,000 (US$98,900) in early 2022, overriding the combined cost of rent and rates at £76,000 (US$87,400).

If the same business started a new contract today for energy it would cost them in the region of £150,000 (US$172,500) per year, the NTIA warned.

Insurance rates have also risen, with the NTIA noting that one 300-capacity venue with no claims and an annual turnover of £1 million (US$1.15m) paying circa £3,100 (US£3,565) for insurance in 2020, but two years later this rose to £5,600.

The NTIA said it was particularly concerning that other insurance firms in the market were asking for rates between £7,000 (US$8,000) and £10,000 (US$11,500).

Furthermore, the trade body noted that businesses are unable to pass on costs to consumers as many have less disposable income and raising prices could lead to drinkers going out less.

A recent survey conducted by the Scotch Whisky Association found 57% of distillers have seen energy costs rise by 10% in the last year, while 29% have seen energy prices double.

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