Liz Truss’s new price cap on household energy bills for two years will be cold comfort to U.K. restaurants and pubs, with businesses only granted six months of an “equivalent guarantee” under the Prime Minister’s announcement today, 8 September 2022.
Truss said that following those six months, the government would provide “further support to vulnerable sectors, including hospitality,” but that further support will not be defined for at least three months.
Truss repeated her opposition to a windfall tax on energy companies, claiming that it would “discourage investment,” and suggested that this moment would be a “bold” intervention despite its cost — expected to be over £150 billion — being entirely footed by first government loans, and then the taxpayer.
Labour leader Keir Starmer focussed on the avoidance of the windfall tax, stating that taxing estimated worldwide profits of over £100 billion over the next two years would not deter investment, because those profits were not generated by any planned manoeuvres by energy companies.
The announcement follows concerted pressure from the lobbies that represent restaurants and pubs to pressure the government for financial support. The British Institute of Innkeeping (BII) and U.K. Hospitality had both projected dire straits for businesses without intervention, with energy suppliers unwilling to renew contracts without unaffordable deposits and / or raising prices by unsustainable amounts.
U.K. Hospitality responded to the plan by saying that one in five of its members would not survive the winter without further support, and pushed further for a reduction in VAT from 20 percent to 10 percent, alongside a further business rates holiday for hospitality.
The problem restaurants and pubs will face is that even with an intervention, their bills will have already increased precipitously. Household bills are already twice the average they were this time in 2021 with the new price cap applied; businesses, similarly, are already facing huge rises, some of which have seen closures.
Rates of restaurant insolvency are already steepening in the U.K., with 1400 that survived COVID-19 unable to weather the loan and rent repayments, staff shortages, and price rises from Brexit and, then, Putin’s invasion. With little concrete detail on plans as yet, many more will be nervous of what is to come.