Propel Legal Briefing - Trust in Truss to fix hospitality’s cost-of-living and energy concerns by Chris Grunert

First appearing in Propel Hospitality Legal Briefing on Wednesday 14th September 2022

Trust in Truss to fix hospitality’s cost-of-living and energy concerns by Chris Grunert

Within the space of a few days, the nation said farewell to Her Majesty the Queen as well as former prime minister Boris Johnson. It does feel like we have entered a new era of British history, which brings many uncertainties, but also opportunity. Going forward, we can only hope that this change of government will create better prospects for hospitality in receiving more support, recognition and stability, which would allow it to truly flourish after such a turbulent few years. This is particularly relevant considering the current discussion in the media about whether the sector will be able to hang on to customers and survive amid the cost-of-living and energy crisis.

Recently, a news article caught my eye which had quite a brash headline. It stated that: “The worst nightclub in Europe is in the UK”. Of course, the premises will remain nameless (pause here to frantically Google the answer). But as it happens, the nightclub in question is actually one which I am quite familiar with, as I used to live in the city. This venue took the title of being the “worst” nightclub after the former number one premises, based in Serbia, burnt down. The club is centrally located, and I recall visiting it on the odd occasion. Even when I lived there it did have a bit of a reputation, and this was more than 16 years ago!

It makes you wonder how such a premises managed to stick around – it’s been going for more than 40 years at this point. The article goes on to describe the cheap drink promotions, sticky carpets, cheesy tunes and sweat-drenched walls. The venue is also supposedly known for being a "rite of passage" for local students. This last comment stuck with me.

Nightclubs are places where experiences are had, memories are made and late-night cultures are built. As many would tell you, some of the best nights out are experienced in venues that, at a surface level, may be considered less than impressive. I believe each venue is like a piece of a jigsaw puzzle that builds a town or city's nightlife culture. The importance of this industry to the nation’s social fabric cannot be underestimated, and I think customers will continue to seek out these experiences, despite predicted further financial hardships.

The cost-of-living crisis is a very real threat to the industry and public alike. While money is currently tight for a lot of people, I believe the country still values socialising with friends and their community in venues that they are loyal to. The finest bottle of beer from your fridge at home drank in front of the TV cannot compete with the pint enjoyed while your feet shuffle along some sticky floor, surrounded by your friends, while distorted cheesy tunes play far too loudly. This is why the public will never abandon their pubs, clubs and restaurants. The industry must be protected and supported through this crisis as it will survive and adapt, just as it did before.

On Wednesday, newly appointed prime minister Liz Truss faced her first Prime Ministers’ Questions. The first question put to Truss was from Thersea Villiers, who got straight to work asking how the government was planning to protect pubs from the rising cost of energy. In her question, Villiers cited an example of a venue in her own constituency (Chipping Barnet) which was facing a 600% increase in its energy bills, reaching a ridiculous £320,000.

The prime minister (who had likely been prepared for the question) agreed the hospitality sector deserves and requires support. She said: “The hospitality industry is vital, and I will make sure our energy plan will help support businesses and people with the immediate price crisis, as well as making sure there are long-term supplies available. The plan will help businesses as well as households.”

The prime minister announced that measures would be put into place on 8 September, capping energy prices. This cap of £2,500 a year (for “typical UK homes”) will last for two years. However, the scheme for businesses, schools, hospitals, other public organisations and charities, which is said to “offer equivalent support”, will last for just six months. Industries which are still deemed to be struggling could receive further long-term support that will be set out at a later date. We eagerly await the government’s review in three months, which will decide what sectors should receive this ongoing help and those which will, unfortunately, miss out. This will take us beyond the October budget, where the true cost of the intervention will be revealed.

When I heard the announcement regarding these measures, I felt a strange sense of déjà vu. For a moment, I could not place why I was feeling it, but then remembered. Just like the furlough scheme that we were presented with during covid, the intervention is most welcomed by the sector. However, the uncertainty and “cliff edge” apprehension created by the short timeframe has certainly got the industry feeling uneasy. With many businesses due to renegotiate their energy contracts in October, this plan will be a relief for some venues, but it does not bring any long-term comfort to the sector.

As businesses approach this cliff edge, many may choose to “bail out” before the car goes over. Unfortunately, this means we could see another wave of venues fearing the worst and closing their doors for good. Understandably, some will feel that these strains are impossible to deal without concrete support. Throughout covid, as businesses approached the furlough cliff edges, how many premature redundancy notices did we see issued? The government must act to avoid unnecessary losses this time around. We must learn from our mistakes.

Chris Grunert is a partner at John Gaunt & Partners