Hospitality Sector Demands Urgent Energy Market Probe

The UK's hospitality industry is calling for a formal investigation into what it describes as a "broken" energy market that continues to burden restaurants, pubs, and hotels with excessive costs and discriminatory practices.

UKHospitality, the leading trade body representing the sector, has submitted a letter to the Competition and Markets Authority (CMA), urging it to launch a Market Investigation Reference (MIR) into the non-domestic energy sector. The body argues that the business energy market has proven "not fit for purpose" and remains "one of the biggest millstones around hospitality's neck."

The letter cites multiple grounds for intervention, asserting that the criteria for an MIR have been "undoubtedly met," including strong indications that competition is not functioning effectively on a widespread scale. A formal investigation by the CMA could empower the authority to propose meaningful remedies and systemic reform.

The call for action is rooted in longstanding concerns. In 2016, the CMA itself found that a lack of effective competition in the energy market forced small and medium-sized businesses to overpay by an estimated 18%—equating to approximately £500 million annually.

These structural weaknesses were laid bare during the energy crisis of 2022/23 when volatile global prices left many hospitality businesses exposed to soaring costs and struggling to secure energy contracts. Since then, operators have continued to report being unfairly classified as "high-risk" by suppliers, leading to inflated prices or outright refusal of service.

David Osmon of Ideal Economics, a former economist at Ofgem, the Competition Commission, and the Office of Fair Trading, helped develop the proposal for an MIR. He remarked, "The energy market is completely broken as far as many businesses are concerned. A fresh market investigation would significantly boost economic growth at virtually no cost to the government."

UKHospitality's chief executive, Kate Nicholls, voiced frustration over the slow pace of regulatory response. "Over decades, it has been proven that it is not fit for purpose," she said. "It has unscrupulously excluded businesses from accessing energy, charged them extortionately when they do offer contracts, and treated operators with contempt when they come to suppliers for help."

Nicholls added that both Ofgem and the CMA have already acknowledged the current system's failings. In March 2023, Ofgem indicated it would consider recommending a market investigation if it had reasonable cause to suspect inadequate competition. By July 2023, Ofgem's internal review confirmed such failings—yet it stopped short of referring the matter to the CMA.

With the government reviewing the performance of regulators, industry leaders argue that now is the time for decisive action. "A swift investigation into the non-domestic energy market would be a prime example of a good regulator acting to benefit the market and investment," Nicholls continued. "There is nothing more detrimental to business investment in the UK than having to pay an excessive amount for energy—and potentially not even being able to access it at all."

As the hospitality sector grapples with economic uncertainty, inflation, and ongoing operational challenges, the need for a fair and functional energy market has never been more pressing.