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Tue 6th Sep 2022 - Update: Truss plans energy bill freeze for businesses, Rekom UK trading, Deliveroo
Truss plans energy bill freeze for businesses amid fear of mass bankruptcies: Liz Truss is expected to freeze energy bills for every household and business in the country in one of her first acts as prime minister. Truss, who will be appointed by the Queen today (Tuesday, 6 September), is ready to cap the cost of gas used for electricity and heating. This would effectively commit the taxpayer to paying Britain’s energy bills beyond a certain level to stop widespread hardship and bankruptcies. Pubs and restaurants have said they face financial ruin because they have no protection from soaring energy prices. Some businesses face a seven-fold increase. Allies of Truss said that the intervention would be “big and bold” and “get money to everyone”, adding it could cost as much as £90bn. Truss is expected to reveal her plans to help with energy bills on Thursday (8 September). A fiscal event to reverse the national insurance rise and cancel planned increases in corporation tax will be held within the next three weeks. Under the plans to freeze bills the government would directly intervene in the wholesale energy market, subsidising the cost of gas being bought by electricity generators and suppliers. Consumers and businesses would have certainty over the cost of power this winter. However, the taxpayer would take on all the risk of surging wholesale gas prices while subsidising the energy costs for the entire country. Sir Iain Duncan Smith, the former Conservative leader and a key Truss ally, told The Times: “I do know that she is going to do something big and bold, and it’s going to be getting the money to everybody.” He said a cost of up to £90bn was “the sort of money that they may well be looking at”, stressing: “There’s no time now to be small or narrowly targeted.” Industry experts believe the scheme will cost at least £60bn a year, which could rise if Russia fails to restore gas supplies to Europe via the Nord Stream 1 pipeline this winter. Yesterday (Monday, 5 September) wholesale gas prices rose 10% on Friday’s (2 September) close after Russia said that full operations would not resume until the “collective West” lifted sanctions. Kwasi Kwarteng, who is expected to become Truss’s chancellor, has said that the government will offer support for families and businesses “through this winter and the next”. Torsten Bell, chief executive of the Resolution Foundation think tank, said the policy would also help to curb the headline rate of inflation. He said: “The advantage is that it has a similar effect as freezing the retail price of gas while also helping businesses. Many firms are on fixed-term deals and around a third up for negotiation this autumn. By capping wholesale costs the government will be shielding these firms from rising prices while also helping consumers.”

Next edition of Propel’s Turnover & Profits Blue Book shows sector losses of £5.4bn: The next edition of Propel’s Turnover & Profits Blue Book, produced in association with Mapal Group, shows the effects of the pandemic, with total losses of £5.4bn being reported by 326 companies. However, a further 293 sector companies are still reporting total profits of £1.5bn. The next edition – which will be sent to Premium subscribers on Friday, 16 September, at midday – will include 619 companies, which are turning over a collective £31.3bn. The Blue Book, which is updated every month, provides an insight into UK operator turnover and profitability over five years, profit conversion and directors’ earnings. Premium subscribers also receive the Multi-Site Operators Database, produced in association with Virgate, and the New Openings Database, which are also updated each month. Premium subscribers also have access to the UK Food and Beverage Franchisor Database, which will be updated every two months. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email jo.charity@propelinfo.com to upgrade your subscription. Subscribers also receive access to Propel’s library of lockdown videos and Friday Wrap interviews, and to a curated video library of the sector’s finest leaders and entrepreneurs, offering their insights on running outstanding businesses in the sector. Premium subscribers also receive their morning newsletter 11 hours early, at 7pm the evening before our 6am send-out; plus regular video content and exclusive columns from Propel group editor Mark Wingett.

Peter Marks – no sign young people losing their desire to going out, second-quarter sales up 7.5% on pre-covid levels: Peter Marks, chairman of Rekom UK, has said there is no sign of young people losing their desire to go out as the business reported a strong performance across its 47 clubs and bars since reopening its venues in July last year. Spend per head has increased 23% to £21.82 (2019: £17.71). Venue Ebitda has increased 112% to £26.3m (2019: £12.4m), or 40% when omitting the “post covid surge” between July and September last year. Rekom UK said there had been an increase in total dwell time, with guests arriving earlier and staying longer while a continued focus on full price sales had resulted in a reduction in free admissions and discounting. Sales in the second quarter of 2022 were up 7.5% to £20,631,000 compared with £19,193,000 in 2019. In the first quarter of 2022, revenue was up 15.1% to £22,802,000 compared with £19,814,000 in 2019. The fourth quarter of 2021 saw sales increase 11% to £27,961,000 compared with £25,191,000 in 2019 while the post-covid bounce saw revenue of £30,354,000 in the third quarter of 2021 compared with £21,706,000 in 2019. The company stated: “Rekom UK is ushering in a new era – the ‘great reset’ – with the health of the company the strongest it has been in years. Its guests, the majority of whom are aged 18-24 do not have the same levels of exposure to the cost-of-living crisis, with the majority having no major financial burdens, and view a night out as an affordable treat, that remains part of everyday living. As a result, and as Rekom’s performance illustrates, in spite of pressures such as the cost-of-living crisis, rising interest rates, staffing and covid-19 debt, one the best performing areas of post-covid hospitality in the UK is that which targets the younger guest. This contrasts sharply with those operators that are food-led, serve an older or more price-sensitive customer demographic, or have high energy consumption and have understandable concerns over their viability in the short term. Rekom’s performance reflects broader long-term consumer trends. History shows that socialising remains relatively stable, even in hard times, hospitality sales have been largely unaffected across UK town centres. Furthermore, analysis of available public company results of the last pre-covid recession (2008-9) shows those that operate in town and city centre sites, in part or in the main, performed better than most in the wider leisure sector and other areas of discretionary leisure spending.” Marks said: “We recognise that many operators are struggling though, particularly those with covid debt. A simple, if temporary, drop in VAT to 12.5% or rates relief will help all hospitality businesses and we support efforts to get this assistance. Yet we are sceptical as to whether the government can or will help further. That said, Rekom UK is in rude health. Our revenues and margin shave improved dramatically to exceed 2019 levels and are now stable, driven by our industry-leading venues and continued focus on good value for our guests. A visit to any Rekom UK venue still only costs, on average, circa £20. Looking ahead, whilst we cannot control the global economy, we know that good value, well-invested propositions thrive through times of adversity. We will continue to focus on our guests and doing what we do best, creating fun, safe nights out, to ensure that Rekom capitalises on demand to emerge from these challenges stronger than ever.” The business has just acquired its fifth Cardiff site after buying the Story nightclub in Greyfriars Road from Excalibur for an undisclosed sum. The 1,400-capacity venue will reopen later this month as District, creating 30 jobs.

Deliveroo faces fresh UK Supreme Court challenge over riders’ rights: Deliveroo is being challenged within the UK Supreme Court over the rights of its riders, months after the company signed a voluntary settlement with the GMB union that granted self-employed members collective bargaining on pay. The Independent Workers’ Union of Great Britain (IWGB) said it is set to challenge Deliveroo, alleging a denial of collective bargaining rights. In May, Deliveroo announced it was forging a “first of its kind” union recognition deal with GMB, which has not traditionally been associated with the gig economy. Now, the IWGB has said it wants to pursue legal action so that Deliveroo couriers would be classified as workers. Deliveroo has emerged victorious in previous UK court cases before on this issue, with workers deemed as self-employed. The IWGB has said Deliveroo’s partnership with the GMB stands in contrast with its principles that self-employed status for workers prevents riders from entitlement to collective bargaining rights. It said the partnership does not address various issues with Deliveroo’s employment practices in proposed negotiations, such as a lack of holiday pay and pensions. The union also said it was “outrageous” for Deliveroo to be spending “hundreds of thousands of pounds” battling it in court over collective bargaining rights after having “just granted collective bargaining rights to another unrepresentative union”. IWGB president Alex Marshall told the FT: “Deliveroo should be investing this money in courier pay and conditions, rather than trying to silence its workers who only want a seat at the table.” However, Deliveroo slammed the case by IWGB and said it “focuses solely on very narrow issues related to the right to collective bargaining in the UK”.

Cost of beer production rises 62% in two years: The cost of the commodities required for the production, packaging and transportation of beer has risen 62% since August 2020, according to research by investing platform eToro. The rate of price growth dramatically outpaces the 12% rise in the UK consumer price index over the same period. The average price of a pint of lager has risen by 8% over the past two years to £4.09, according to the latest figures by the Office for National Statistics. But analysts at eToro told the Daily Mail the new index suggests drinkers may be in for even steeper price rises in the coming months as the cost of producing beer continues to rise. Barley and malt spot prices have increased by 104% and 87% respectively since August 2020. Wheat prices have also risen by 39%. The biggest rise in costs for beer production comes from gasoline, which is used by machines farming the ingredients of beer as well as for the transportation of the product. Gasoline spot prices have jumped by 138% over the last two years. Only the price of rice, which is used in combination with barley and malt to lighten beer, has remained more or less stable, dropping by 1%.

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