Pub business energy: what drives the bill

A pub's energy bill has an odd shape. Cooling, cooking, heating a large room for long hours and, very often, a flat upstairs all share one supply. This guide covers what drives pub energy costs, how mixed pub-and-home supplies are taxed, and what brewers and distillers should know.

What a pub actually uses energy for

An Everards energy-saving guide for pubs says cooling drinks accounts for over 10% of a pub's total energy cost, and about half of that is the beer cellar. So the cellar alone is something like 5% of the bill, and it runs through the night. The rest is split between:

• Heating and ventilation for large, high-ceilinged rooms, often in older buildings with poor insulation.
• Kitchen equipment, if you serve food. See our restaurant energy guide.
• Lighting, signage, fruit machines, TVs and sound systems, which run for long hours.
• Hot water for glass washing and bar cleaning.

Open hours matter. A pub that trades from late morning to late night has a very different usage profile from a 9-to-5 shop, with most consumption in the evening.

The cellar: the easiest place to waste money

The Everards guide gives specific advice on cellar cooling. Set the cellar to 11-13°C and check the thermostat with a separate thermometer. Overcooling by just 1°C can add up to 10% to cellar energy costs. Keep heat-producing equipment such as line coolers and ice machines out of the cellar, draught-strip the doors, keep the condenser ventilated and clean the coils. The guide says that following these principles can save between 10% and 50% of cellar energy, though results will vary.

Worked example: if cellar cooling costs you £1,200 a year, a degree of overcooling could waste up to £1,200 × 10% = £120. Correcting it costs a few pounds for a thermometer.

A pub with a flat: how VAT works on a shared supply

Many pubs have living accommodation above, on the same meter. The supply is on a business contract, but part of the electricity is domestic use, and HMRC's fuel and power notice (701/19) lets that part be charged at the reduced rate. The rules:

• If 60% or more of the supply is for qualifying domestic use, the whole supply is reduced-rated.
• If less than 60%, only the qualifying portion is reduced; the rest stays at 20%.

Worked example: electricity costs £10,000.00 before VAT and you estimate 25% is the flat. VAT on the pub portion is £7,500.00 × 20% = £1,500.00. VAT on the flat portion is £2,500.00 × 5% = £125.00. Total VAT £1,625.00, against £2,000.00 if all of it were taxed at 20%. Between 1 October 2026 and 30 June 2027 (extended from 31 March 2027 at Budget 2026), qualifying domestic electricity in Great Britain is temporarily zero-rated, so for that period the flat portion would carry £0.00 VAT and the total would drop to £1,500.00. Business use stays at 20%.

You need a fair, documented basis for the split, such as a sub-meter or a reasoned estimate. Ask your supplier what declaration it needs. See our guide on the reduced-rate VAT declaration.

A sub-meter for the flat, or even a separate supply, makes this far simpler and lets the flat be on a domestic contract. It may need your network operator's involvement, so ask early.

Example yearly bill for a food-led pub

Using illustrative figures of 60,000 kWh of electricity at 25p/kWh with a 100p/day standing charge, and no flat: energy 60,000 × £0.25 = £15,000.00; standing charge 365 × £1.00 = £365.00; Climate Change Levy 60,000 × £0.00801 = £480.60. Subtotal £15,845.60; VAT at 20% £3,169.12; total £19,014.72. These are example rates, not a quote. With a spread of ten pence either way on the unit rate, the yearly bill moves by 60,000 × £0.10 = £6,000.00 before VAT, which is why the quote deserves a proper look. Our cost calculator lets you try your own numbers.

Contracts, tenancy and tied arrangements

• Tenants of pub companies. Check your tenancy or lease for who holds the energy contract and whether you must buy through the landlord. Arrangements differ between pub companies and agreements, so do not assume.
• Taking over a pub. If the previous operator's contract ended, you may start on a deemed rate; sort a contract on day one. See moving premises and deemed contracts.
• Seasonal pubs. Standing charges still run when you are shut; see standing charges when closed.
• Size. A typical independent pub is a microbusiness, with the extra protections that brings.

Breweries and distilleries

A micro-brewery or craft distillery uses process heat (mash tun, boiler, still) and refrigeration, often with a large share of the energy bill in the production process rather than the building. If you use a lot of gas, your usage may be too high to be a microbusiness for gas, and your contract terms will differ. Climate Change Agreements, which cut the levy for sites in sectors with an umbrella agreement, are worth asking about, but we could not confirm that brewing or distilling currently qualifies. Ask your trade association and see our CCA guide. Beer duty and spirits duty are separate from energy and are not covered here.

Cutting the bill: a short list

1. Fix the cellar first (temperature, doors, coils).
2. Replace old lighting with LED; the Everards guide says LEDs can cut lighting energy costs by up to 70%. See LED lighting for business.
3. Set heating timers to follow opening hours and keep doors closed in winter.
4. Take monthly meter readings and compare with the bill to catch estimates.

Events, sport and seasonal peaks

Big-screen sport, live music and Christmas trading all push usage up for short periods. On a half-hourly meter you pay for what you actually use, and some contracts carry capacity charges for your highest demand (see supply capacity and kVA charges). Spreading load, for example by not running every appliance at once, helps keep that peak down. Bills for the busiest months will look high; compare them with the same month last year, not with the month before.

Next steps

1. Decide whether the flat should be sub-metered or declared for VAT.
2. Find your contract end date and compare renewal quotes at least a few months ahead.
3. Walk the cellar with a thermometer this week.