(Bloomberg) -- Britain’s nightlife, which struggled to survive when the pandemic kept revelers at home, is facing an uphill battle again as the cost-of-living crisis squeezes promoters and punters alike.
Nightclubs are being hit by rocketing energy bills, while inflation has pushed consumer confidence to a record low and convinced many people to cut out their non-essential spending.
The trend is threatening to close more of the establishments that have helped make the UK a destination for tourists and which contributed £46 billion ($55.4 billion) a year to the economy before the pandemic, according to the Night Time Industries Association.
“It’s been tough times,” said Hans Hess, owner of the Egg London nightclub near the King’s Cross, which along with most other clubs closed temporarily during Covid lockdowns. “We re-opened a year ago, and now we’re faced with new problems such as inflation.”
His concerns are widespread. Five organizations representing Britain’s hospitality businesses wrote to the government this week calling for urgent action on energy prices. With the cost of natural gas more than tripling since May and pushing up power prices, more companies are finding costs they once thought were predictable are starting to eat into their earnings.
The result has left many promoters uncertain about how to cope, frozen in the face of spiraling bills. A June report from the NTIA found 54% of nightlife businesses had not yet renewed their gas and energy contracts, and those that did reported a 37% surge in costs from pre-pandemic levels.
Marco Di Rienzo, owner of the Yorkshire restaurant Santoni, expects his winter energy bill to reach upwards of £2,000 per month. That’s almost double what he currently pays. He’s preparing to close his business five years after it opened, and names rocketing energy costs as one of the reasons.
The situation is worsening by the day. Businesses that managed to delay renewal of energy contracts could see prices increase five-fold this October, according to a separate report from Cornwall Insight, an energy consultancy.
“We must think much harder about what this energy crisis is doing to business,” said Robert Buckley, head of relationship development at Cornwall Insight. He said action is needed so “we don’t see companies with heritage, roots in their communities and otherwise good prospects washed away.”
Households for now have been are shielded from a surge in energy costs at the wholesale level, but regulators will allow consumer bills to rise again in the autumn. That could push inflation past 13%, the highest in 40 years, and tighten the grip on income that some people would normally spend in bars and clubs.
The government’s energy regulator next week is due to announce just how much consumer bills will increase when the cap on charges is allowed to increase again in October.
Those bills are adding to headaches for consumers. Wages adjusted for inflation fell 3% in the second quarter, the sharpest pace in more than two decades of records, official government data published this week showed.
For Egg, that means it’s more difficult to draw in customers.
“We’re offering drinks deals, reduced ticket prices and doing competitions -- giving tables and free entries away,” Hess said. “At the moment, we need to hit our weekly targets and that’s the only way to do it.”
He’s also replaced appliances, curbed use of gas and started looking for more ways to reduce the club’s energy footprint.Lobby groups such as UK Hospitality have called for lower taxes to help the sector and a cap on businesses' energy bills similar to the one applied to households.
Government officials and the leadership contenders have pledged action in September once a new Cabinet is in place.
“I know that rising inflation is creating challenges for families and businesses,” Chancellor of the Exchequer Nadhim Zahawi said Friday. “Government support is continuing to arrive in the weeks and months ahead, targeted to those who need it most like pensioners, people on low incomes, and those with disabilities.”
The night time ecosystem may have to survive with fewer punters than it attracted before the pandemic. With inflation stretching wallets, many businesses report a drop in sales and an increase in operational costs.
“The government cannot continue to understate the escalating crisis,” Michael Kill, chief executive officer of the NTIA, said in a statement. “Without intervention, businesses who have survived the pandemic, supported by public funding, will face further uncertainty, and in many cases, permanent closure.”
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