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Industry News

Industry reacts to UK Government’s energy cap

Featured image credit: John Matychuk on Unsplash

The UK Government has announced support for businesses this winter, which will see wholesale energy costs for businesses cut roughly in half.

The scheme means that wholesale gas and electricity prices for firms will be fixed for six months, starting from October 1. It has been reported that the scheme will be reviewed after three months. 

While the live entertainment, venue and hospitality sector has welcomed the support from the Government, it is doubtful that the cap will help businesses to truly whether the storm beyond those six months. 

Michael Kill, chief executive of the Night Time Industries Association, said: “We welcome the detail of the long awaited announcement of the ‘Energy Bill Relief Scheme’ for businesses, and cautiously work through the impacts and benefits of the scheme with members. 

“However we remain concerned that this measure to cap the wholesale price to energy supply companies may not result in sufficient relief being extended to business customers, given that energy suppliers remain free to impose additional mark-ups such as network charges and operating costs, which are uncapped.

“The net result of this could be a position where small businesses are still being asked to pay unaffordable energy bills of several hundred percent more than in previous years, which is clearly not sustainable.”

Kill added: “While we acknowledge that it will take some time for details and final pricing to businesses to become clearer, we also note that this proposal will exclude businesses that renewed before April 1 where energy costs were still untenable, and does nothing to alleviate the high levels of energy supply debt incurred by businesses exposed to uncapped pricing over the last few quarters, and in isolation is unlikely to be enough to ensure businesses have the financial headroom to survive this winter.

“If we are to ensure the survival of our sector it remains imperative that the short term relief announced today is extended to 12 months and followed up with further action by the Government in the budget this Friday, and that such action must incorporate our core asks, specifically business rates relief and a reduction in VAT across the board.”

Music Venue Trust (MVT) also welcomed the help from the Government, and said: “Music Venue Trust warmly welcomes this intervention by the Government, which appears at face value to comprehensively tackle the immediate short term energy crisis for grassroots music venues.”

MVT also highlighted that ‘pubs’ would be able to attract support for longer than the six month period initially mentioned, and it will ask for clarification on whether or not this includes music venues and other licensed premises. 

“We have presented to the Government the case for action on VAT and Business Rates and await the statement by the Chancellor on Friday to see what further action will be taken to stabilise the sector and return it to growth,” the statement from MVT added.

“Music Venue Trust has requested that the Government work with us on long term plans to secure affordable, sustainable and resilient energy for the sector. There is a big opportunity presented by this crisis to support a radical intervention into energy supply and demand.

“We strongly urge the Government to use the period of protected energy prices to bring forward plans to permanently tackle the causes of the energy crisis. Grassroots music venue real estate is a prime candidate for renewable energy investment.”

UK Music, a British umbrella organisation for the UK’s music sector, has welcomed the support but has highlighted the continuing issues for the sector in its annual ‘This is Music 2022’ report. 

The report was published today (Thursday) and has revealed how the sector has begun to slowly recover from the initial impact of the COVID-19 pandemic. While the current energy prices and cost-of-living crisis may be daunting for businesses, the report still included some positive notes. 

The UK music industry’s continuation to the UK economy in 2023 was £4bn ($5bn/€5bn), up 26% on £3.1bn in 2020. However, it is still down 31% on pre-pandemic levels. 

Employment in the music industry rose to 145,000 jobs in 2021, a 14% increase on the 128,000 jobs in 2020, but still down 26% on the pre-Covid 197,000 figure. 

Exports in the sector rose in 2021 to £2.5bn, up 10% on the £2.3bn figure in 2020, but is still a decrease of 15% on the £2.9bn in 2019. 

The figures show the industry’s steps to recovery, and on the Government’s introduction of help with energy costs, UK Music chief executive Jamie Njoku-Goodwin said: “We welcome the Government’s announcement to combat the impact of soaring energy bills, which will give music businesses some urgently needed support. However, we need clarity about what happens after that support is withdrawn after six months.

“And we still need to see more assistance to secure our sector’s long-term recovery, including a significant cut in VAT from its current rate of 20% – something the Government did in the pandemic to support the music sector.”