New figures from the Office for National Statistics show concern about energy costs has reached its highest level among UK businesses, with hospitality emerging as one of the sectors most exposed to rising energy prices.

For pubs, bars, restaurants and hotels, energy is no longer a background overhead. It has become a critical business cost that directly influences profitability, pricing decisions and investment plans. With electricity prices remaining elevated and many operators facing increasing supplier operating costs, business owners are looking for ways to manage their energy bill while maintaining service standards.

Why energy costs remain a challenge

Energy prices are affected by a complex range of factors, including wholesale gas prices, network costs, government policies and the ongoing transition towards renewable energy. In the UK, gas still influences electricity prices almost all of the time, meaning volatility in wholesale markets can quickly affect electricity bills.

Energy suppliers must also absorb costs associated with infrastructure investment, market volatility, customer service and environmental schemes. These different costs ultimately feed through into the price businesses pay for their energy tariff.

Hospitality venues are particularly vulnerable because they consume significant amounts of electricity and gas. Heating, cooling, refrigeration, kitchen equipment and lighting all contribute to energy usage throughout the day. Climate control alone can account for around half of a building's energy use, making efficient operation increasingly important.

Hospitality businesses feel the pressure

Unlike some sectors, hospitality businesses cannot simply reduce operating hours or switch off essential equipment without affecting customers.

Pubs need cellar cooling systems. Restaurants rely on commercial kitchens. Hotels require heating, hot water and lighting around the clock. As energy costs increase, operators often face difficult decisions around pricing, staffing and investment.

Many businesses are also competing in markets where customers remain price-sensitive, meaning increased industry costs cannot always be passed on through higher menu prices.

The challenge is not just today's energy bill. It is understanding how future market changes, supplier costs and demand pressures could affect cash flow over the coming years.

Fixed or variable tariffs: which is right for your business?

One of the most important decisions is choosing between fixed and variable tariffs.

A fixed deal offers certainty. Businesses agree a unit rate for a specified period, helping with budgeting and protecting against potential increases in wholesale prices.

A variable tariff may provide savings when the energy market falls, but it exposes businesses to greater price fluctuations.

Example

A pub uses 120,000 kWh of electricity annually.

Fixed tariff

• Unit rate: 28p per kWh
• Annual electricity cost: £33,600

Flexible arrangement

• Starting unit rate: 24p per kWh
• Annual electricity cost: £28,800

The flexible option looks attractive initially, saving £4,800. However, if wholesale prices rise and the unit rate increases to 32p per kWh, annual costs would increase to £38,400.

The right choice depends on cash flow, risk tolerance and future business plans. Businesses should regularly compare energy prices rather than automatically renewing existing arrangements.

Calculating the return on energy-saving investments

With energy costs remaining high, many hospitality operators are reviewing capital expenditure projects designed to reduce consumption.

Common examples include:

• Energy-efficient refrigeration
• LED lighting upgrades
• Smart heating controls
• Kitchen equipment replacement
• Solar panels
• Building insulation improvements

The key question is whether the investment delivers an acceptable payback period.

Example

A restaurant invests £20,000 in new refrigeration equipment.

Expected annual energy savings: £5,000

Payback period:

£20,000 ÷ £5,000 = 4 years

After the payback period, the ongoing savings contribute directly to profitability while potentially reducing maintenance costs and improving operational reliability.

Don't overlook capital allowances

When investing in energy-efficient equipment, businesses should also consider available tax relief.

Many qualifying assets may be eligible for capital allowances, allowing expenditure to be deducted against taxable profits. This can significantly improve the overall return on investment and reduce the net cost of upgrading equipment.

Before proceeding with major purchases, it is worth assessing:

• Whether the expenditure qualifies for capital allowances
• The timing of the investment
• The expected energy savings
• The impact on cash flow
• Alternative financing options

A tax-efficient investment can deliver greater long-term value than focusing solely on upfront purchase price.

Looking beyond the next energy bill

Rising energy prices remain a significant concern for hospitality businesses, but they also create an opportunity to review contracts, improve efficiency and strengthen long-term resilience.

Regularly reviewing energy supplier agreements, monitoring energy usage and investing in appropriate technology can help businesses reduce costs and improve forecasting accuracy.

For hospitality operators in particular, the businesses most likely to succeed will be those that treat energy as a strategic cost rather than simply another bill to pay.

At HLWA, we work with hospitality businesses across Bristol, South Wales and the South East to analyse costs, plan investment decisions and understand the tax implications of major expenditure. If you're considering an energy-saving investment or reviewing your current energy arrangements, we're here to help you make informed commercial decisions.