The Hospitality Sector Under Pressure: Rising Costs, Government Changes, and Energy Volatility

Survival and Savings: Navigating Rising Costs in the Hospitality Industry

The UK’s hospitality sector is at a crossroads. Businesses are grappling with mounting financial pressures as rising operational costs collide with upcoming government changes. From Employer National Insurance Contributions (NICs) to the persistent volatility of energy prices, the sector faces tough decisions.

Now, more than ever, survival is about adaptability and finding innovative ways to manage costs. With energy bills often representing a significant share of expenses, reducing energy costs is one of the most effective ways to safeguard your business’s future.

The Hospitality Sector Under Pressure

From April 2025, changes to Employer NICs will see an additional £1 billion in costs added to the sector, as 774,000 more workers become eligible for contributions. For an industry already juggling rising wages and inflation, this marks yet another challenge for businesses working to maintain their margins.

Combined with the ongoing energy crisis—which has seen businesses pay electricity rates as high as 90p/kWh in 2022—these costs are driving many operators to the brink. The result? A wave of closures, price increases, and heightened scrutiny from customers, who may not fully understand the pressures behind rising costs.

“Price Changes Are About Survival, Not Profit”

As one hospitality operator recently shared:

“It’s really disheartening having to see operators and frontline staff constantly justifying their pricing, dealing with complaints and reviews, and taking the blame for something that has been forced upon them.

Price changes are for survival, not profit. It’s about being a responsible business owner trying to create a sustainable operation, working to a workable gross profit, creating jobs, and adapting to the new economic environment. Otherwise, businesses won’t be here.”

This sentiment reflects the reality for so many in the industry today. Businesses are fighting to maintain quality and stay afloat while navigating a minefield of rising costs and changing expectations.

Energy Costs and the Hospitality Industry

For hospitality businesses, energy costs are a constant concern—and the options available are shrinking. Many suppliers, such as EDF and E.ON Next, are no longer accepting hospitality businesses as clients. Those that do often impose stricter credit requirements, making it difficult for businesses with lower credit scores to secure competitive rates.

This leaves hospitality operators with limited options, forcing them into higher-cost contracts or out-of-contract rates that significantly impact their margins.

Where We Can Help

This is where Smart Energy Company makes a difference. By working with the full market, we negotiate better rates tailored to your business’s needs. Whether you’re struggling to meet credit requirements or need help finding a supplier willing to work with your business, we can provide as many options as possible to help you save.

We recently helped a small independent Italian restaurant with two sites in Windsor save £26,661.84 annually by securing competitive rates despite the challenges in the market.

Rising Energy Prices: What You Need to Know

Energy market volatility remains one of the biggest challenges. On 22 January 2025, the UK’s day-ahead electricity price spiked to £241/MWh, the highest since 2022.

Market Trends and What They Mean for You

For businesses nearing contract renewal or even those signed within the last year, these price movements signal higher costs ahead. Businesses who agreed contracts during a volatile period may now find their renewal options limited, while those on variable-rate contracts face even greater uncertainty.

How We Can Help: Energy Savings That Matter

While challenges in the sector continue to mount, there are real opportunities for savings, even in today’s volatile market. Energy costs are one of the few areas where businesses can take actionable steps to protect their margins.

1. Discover Hidden Savings

We recently helped a small independent Italian restaurant with two sites in Windsor save £26,661.84 annually. Despite the volatility of the market, we were able to negotiate rates that delivered significant cost reductions.

2. Stay Ahead with Market Insights

Sign up for our free market reports to keep an eye on trends and make informed decisions about your energy strategy.

3. Optimise Your Usage

Small changes can yield big results. Investing in energy-efficient equipment, conducting an energy audit, or upgrading to smart meters can reduce your energy consumption—and your costs.

Feeling the pressure of rising costs?

What’s at Stake for the Hospitality Sector?

The challenges facing the industry are about more than finances—they’re about the future of hospitality in the UK:

• The Loss of Quality Experiences: Rising costs threaten the ability to source locally and maintain high standards.

• The Decline of Cultural Hubs: Hospitality businesses are essential to vibrant communities, but closures could leave lasting gaps.

• The Impact on Food Culture: Unlike many European counterparts, the UK’s food culture is still growing. Without support, this growth could stagnate.

FAQs

Conclusion

The hospitality sector is facing a perfect storm of challenges, but there are ways to adapt. By tackling energy costs head-on, businesses can take control of their operational expenses and safeguard their future.

At Smart Energy Company, we’re here to help. Let’s work together to secure savings, reduce costs, and keep your business thriving—no matter what the market throws your way.

Secure Your Energy Future

Don’t let rising energy costs dictate your business’s future. At Smart Energy Company, we specialise in utility procurement, helping you navigate the complexities of energy contracts. With access to over 25 suppliers for gas, electricity, and water, we ensure you get the best deals tailored to your needs.