The Manchester pubs and brewers facing an uncertain future as energy bills spiral
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The city’s hospitality sector says the cost of living crisis has left businesses facing unsustainable costs to keep going, especially once the energy price cap rise kicks in during October.
Pub owners and brewers say businesses are already going to the wall in Manchester and politicians need to act now to prevent another wave of venues closing and people losing their jobs during the remaining months of the year.
‘A pub on standard markup would have to charge £7 a pint’
Steve Dunkley is the owner and brewer at Beer Nouveau, which is based in a railway arch on North Western Street.
He laid out for ManchesterWorld the grim financial scenario people in the beer industry are facing.
Mr Dunkley said breweries say their electricity bills double around a year ago, and now that second figure is set to almost quadruple. In effect, in barely 12 months a standard brew will have gone from costing £100 for the electricity to setting brewers back £800.
In the same time frame malt has gone up from 48p a kilo to 98p a kilo, a standard hop from £10.81 a kilo to £16.66 a kilo and yeast from £30 to £50. This works out at a 50% increase for making a keg of a fairly standard 4% ale.
In addition breweries have to pay staff wages and the other overheads of the business such as heating and lighting. All this means cost rises being passed on, with beers selling a year ago for £70 a keg now having to be priced at £105.
And that means pubs also have to hike their prices, with a watering hole on standard markup charging £4.50 for a pint now looking at potentially having to sell beer at as much as £7 a pint.
Mr Dunkley said: “Those are the figures that we’re having to work on, and they’re not pretty. They’re not even including the rise in basic electricity usage, which for our railway arch was £150 a month just over a year ago, and looking to be £600 a month, and we don’t even have heating in our place.
“These amounts don’t include brewing costs, as I keep those separate. So just to stay treading water, we’d have to make an extra £450 a month.”
Mr Dunkley says the sector is running on tight margins and the price hike for energy in October, which is likely to make the average household annual bill around £3,500, has got businesses extremely concerned.
He said: “There are already several breweries closing down and selling up. There were quite a few closing who didn’t make it through recovering from how Covid affected the industry, so we saw a lot of brewing equipment on the market, driving down its value.
“And now we’re seeing a sudden wave of others who just made it through closing down too, and the money they can get for their kit is even less as the market is flooded.
“So it’s not just that they’ve lost their businesses and their staff have lost their jobs, but their assets are worth a lot less and they’ll struggle to repay outstanding debts.
“The same goes for the pubs. They’ve got rocketing energy costs too, and they’ve got rocketing stock costs. They were paying £70 to £120 a keg of beer, soon they’ll be paying £100 to £180 for the standard beers. Your hoppier or stronger ones are going to be even more expensive. They’re either going to have to put their prices up a lot, which will drive away custom, or they’re going to be closing down.
“If this forecast energy price rise happens, and I’m seeing electric company quotes breweries and bars are getting, then we’re going to see a lot of the independent or smaller breweries and bars close.
“There’s just no way they’ll be able to stay open. It’s an industry that runs on tight margins as it is, and it can’t afford this.”
‘One of our venues has seen a 300% energy increase’
Another business feeling the pinch is Seven Bro7hers, which has a brewery and tap in Salford and also runs beerhouses in Ancoats, MediaCity UK and Middlewood Locks as well as a bar at Manchester Airport in Terminal Two.
The family-run firm says that prompt action by politicians now could preserve thousands of businesses and livelihoods.
CEO Keith McAvoy said: “The rate that energy costs are increasing for businesses is unprecedented and unsustainable – and this is exacerbated after incurring huge debts due to the pandemic.
“The hospitality sector in particular is suffering huge increases. One of our venues for instance has seen increases of 300% in energy costs with the average monthly electricity bill rising from £2000 to almost £6000 per month.
“The government needs to act now. It is already too late for many businesses who have had to close their doors but if action is taken now then thousands of businesses could survive.
“We need a drop in VAT immediately, a cut in business rates would also be helpful and a deferment of bounce back loans would have a positive impact on our business.”