Government must investigate energy pricing for businesses, urges hospitality body
The boss of one of the country’s leading hospitality bodies has urged the Government to look into energy pricing for commercial businesses.
UKHospitality chief executive Kate Nicholls has written to Business Secretary Grant Shapps, calling for Downing Street to instigate an investigation into energy bills from Ofgem and the Competition and Markets Authority (CMA).
Hospitality businesses are concerned suppliers are quoting prices significantly above the wholesale price, signalling a disconnect from previous pricing models, while undermining the Government’s Energy Bill Relief Scheme.
The margin between wholesale and retail energy prices has soared over the last six months, despite Government’s intervention in the market.
Typically, the retail price would be slightly above the wholesale price, but this is no longer the case with hospitality businesses now reporting a significant difference between the two.
They argue there is no rational explanation offered to justify the increase.
The group argues that any investigation needs to be rapid, reporting before Christmas, to ensure the energy market is operating competitively and the Government is getting value for money from its support package.
The Energy Bills Relief Scheme was unveiled by the Government last month for businesses.
It provides a ‘maximum discount’ of £345/MWh for electricity and £91/MWh for gas.
Hospitality sector at risk from energy crisis
Nicholls wrote that the hospitality sector is “extremely vulnerable to energy price fluctuations and has “been badly affected by the ongoing energy crisis.”
She argued the soaring costs are hitting businesses which have still not fully recovered from the pandemic and may be carrying substantial debt as a result, while also facing a downturn in consumer spend due to the cost-of-living crisis.
The hospitality boss said: “The Government’s support package for business is absolutely vital but there are real fears that this substantial package of support is being undermined by energy suppliers quoting far above the wholesale price, with no transparency as to why. Many businesses are still not being offered fixed rates at all despite the certainty provided to suppliers by the Government.
“I believe it is in the interests of business, the taxpayer and the Government itself to be completely assured that its support package is being delivered in the fair way it intended and not used for commercial gain at a time of national difficulty.”
Hospitality is the third largest private sector employer in the UK; double the size of financial services and bigger than automotive, pharmaceuticals and aerospace combined.
The sector generates £130bn in economic activity and provides £39bn of tax for the exchequer, and also represents 10 per cent of UK employment, six per cent of businesses and five per cent of GDP
UKHospitality is home to over 750 companies operating around 100,000 venues in a sector which employed 3.2m people prior to the pandemic.
When approached for comment, a BEIS spokesperson said: “The Energy Bill Relief Scheme is shielding businesses across the country from soaring energy prices, saving them around half of their wholesale energy costs.
“We are aware a small minority of businesses have reported that some energy suppliers have set prices that undermine the benefits of the Energy Bill Relief Scheme.
“We are working with the regulator Ofgem to ensure licence conditions have not been breached and to ensure businesses are able to see the full effects of support offered by the scheme.”