As prime ministerial honeymoon periods go this one could barely have been shorter. No sooner had Liz Truss got her feet under the 10 Downing Street table on Tuesday than her ministers and officials were putting the finishing touches to a monumental support package to help households and businesses cope with skyrocketing energy bills.
The plan, announced on Thursday and expected to cost well over £100bn, will fix the energy price cap for consumers at £2,500 a year for an average household for two years. Businesses will receive equivalent support for six monthsafter which ministers plan to offer focused support to vulnerable industries including hospitality. The government said companies should also look at how they can improve energy efficiency and on site power generation. Truss also announced a review to ensure net zero is delivered by 2050 in a way that is pro-business and pro-growth.
UKHospitality CEO Kate Nicholls welcomed the prime minister’s recognition of the specific struggles facing the hospitality industry and the promise of further support but said more help would be needed. “While the welcome energy price freeze will ease the pressure on our customers and colleagues, high bills will still constrain spending in the sector and operators themselves will still have to fund energy bills and other rising costs. For many hospitality businesses this will prove too much to bear and hundreds of community assets will be shut and jobs lost unless additional support is brisk and bold.”
The government also plans to end the ban on fracking and give approval for more oil and gas exploration in the North Sea, which climate campaigners believe is at odds with the UK’s net-zero commitment.
The package comes at a desperate time for the hospitality sector and supply chain with energy price inflation just one of a range of challenges facing businesses. A survey of operators in the sector from UKHospitality published this week showed that on top of energy price rises, the cost of living crisis will cost an anticipated £25bn in lost trade, likely to result in a 15% drop in employment – equivalent to 383,000 jobs across the UK.
One in five businesses said they would not survive the current crisis with three in five operators saying they were no longer profitable. The survey, carried out before the government’s energy package was announced, found sector businesses were experiencing average energy price increases of 238%, with more than 70% of businesses seeing bills more than double, and nearly 30% hit with rises of over 300%. Food ingredient prices are also escalating with year-on-year inflation remaining in double digits for the sixth month in a row in July, according to the latest CGA Prestige Foodservice Price Index.
Following the UkHospitality survey, nearly 300 businesses including Just Eat, Mitchells & Butlers, Pizza Hut UK and Caffè Nero put their names to an open letter asking new chancellor, Kwasi Kwarteng, for a plan that cuts business costs, stimulates demand and tackles inflation. The demands include a 10% headline VAT rate for hospitality; a business rates holiday for all hospitality premises, with no caps applied; and deferral of all environmental levies.
Food and environment NGOs, by contrast, have spent much of the week urging the new prime minister to be ambitious in her green agenda amid fears that the make-up of her cabinet hints at climate and environmental issues being deprioritised. Jacob Rees-Mogg, who has previously expressed scepticism over both climate change and the policy measures to tackle it, has been installed as the new secretary of state for business, energy and industrial strategy. New Defra secretary of state, Ranil Jayawardena, meanwhile has consistently voted against measures to prevent climate change, according to the TheyWorkForYou website.
Green Alliance executive director Shaun Spiers told The Guardian: “It matters who is in the cabinet. Without strong proponents, the net zero agenda will be in danger.”
The Chartered Institute of Environmental Health (CIEH), meanwhile, urged Jayawardena to “seize the opportunity to show greater ambition in setting environmental protection targets to demonstrate that the UK is a world leader in the fight against climate change”.
A full analysis of what a Liz Truss-led government might mean for food and the environment will feature in Monday’s Footprint Premium.