Soaring energy bills: Small businesses face a doomsday scenario

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Inflation in the UK has already reached 10.1 percent, amid fears it will rise even further – making energy prices simply unaffordable.

To cope with surging costs, business owners now face the difficult decision of either increasing prices or making workers redundant.

One owner has told how his firm currently pays around £900k a year in energy – but this is forecast to rise to £6million in October.

Ministers were last night urged to act or risk “widespread business failures”, as rising costs deal heavy blows to smaller enterprises, which employ around 13 million people.

Small businesses are not shielded by the energy price cap – due to rise in October – like households.

Martin McTague, the national chair for the Federation of Small Businesses, said: “We’re seeing a toxic cocktail of rampant inflation, high taxes, soaring energy costs and shrinking economic growth.”

“While the consumer prices rate of inflation bursting through 10 percent is eye-watering, producer input prices are up by more than double that figure – and this will filter through, pushing up the cost of living even more.”

“The cost-of-living crisis can’t be solved without addressing the cost-of-doing-business crisis – that’s why we need to see a reversal of the hike in National Insurance, a cut in VAT and fuel duty and help for struggling small firms to match help being given to households.”

The Confederation of British Industry said business rates – the tax firms pay to their local councils – should also be frozen for the financial year ending April 2024.

If this does not happen, business rates will increase in line with inflation, which has sky-rocketed.

Professor Jonathan Portes, of King’s College London, called rises in businesses’ energy bills “astronomical”, adding: “Unless the Government acts, this will lead to widespread business failures, as well as higher prices, making it more difficult to get inflation down.”

Regulator Ofgem is due to announce the new price cap, which will come into effect from October, on Friday – and based on latest gas prices, it is said the cap will hit £4,649 next January and £5,856 in April. But an uncapped price surge will meanwhile have a massive impact on businesses, experts have declared.

Alan Thomas, UK CEO at Simply Business, said business owners are resorting to “survival tactics”.

He said: “Rising fuel and energy prices are putting over half of UK small businesses at risk of collapse…”

“Some 59 percent of small business owners are calling on the Government to review or reduce the energy price cap. Some 49 per cent of them will be raising prices, 48 percent are halting new hires and 40 percent are putting expansion plans on hold.”

“We’ve also seen over 20,000 small business owners apply for our £25,000 Business Boost grant.”

Former Tory leadership candidate Penny Mordaunt said of the stricken businesses: “They are the lifeblood of our economy. We don’t look after sole traders enough.”

“There is more we can do to support them.”

Kuldeep Singh: “Our electricity bill will be £6million. We don’t have that kind of money.”

A business owner facing a £6million energy bill is calling on Government to “pull their finger out”.

Kuldeep Singh, 55, is a director at Blowplast, a plastic moulding company which makes milk bottles. He says his High Wycombe firm currently pays around £900k a year in energy but this is forecast to rise to £6million in October.

Kuldeep says his company has not faced a crisis like it in the 20 years it has been open – and up to 90 workers could be affected.

Inflation in the UK has already hit 10.1 percent, with fears it will rise even further – making energy prices unaffordable.

Kuldeep said: “This is the biggest issue I’ve seen in energy prices. Our annual electricity bill is set to go up to £6 million on the 1st of October and we don’t make that kind of money.”

“So the Government need to pull their finger out and come up with a survival plan and focus on the industry.”

“All they’re offering is small business relief which doesn’t even scrape the surface.”

“We create plastic mouldings for milk bottles all over England. We’re facing an energy crisis and if the government don’t take action 90 employees’ jobs could be effected directly or the consumer will have to pay the price.”

Steve Baker, the MP for Wycombe, met with the business last week and urged ministers to act swiftly.

He said: “This is an international energy emergency which will have devastating consequences for businesses and households across the UK, Europe and the world.”

“It follows not only the war in Ukraine but decades of ill thought through energy policy by all political parties against which I have been battling.”

“Ministers must act with extreme urgency and resolve to secure plentiful, inexpensive energy as fast as possible. We can only hope that the energy sector is able to respond swiftly enough to make a difference.”

Kuldeep added: “I don’t see how people can survive a 562% increase [in price]. The figures are beyond the profitability of most companies.”

“Initially, when we started the conversation it was only a double increase, everyday the conversations were different.”

“And even if I wanted to secure electricity at £6 million today, we would be unable to do so, that is how shaky the market is.”

And Kuldeep is not the only one struggling.

Ant Foulds has been running the Forth Bay Guest House in Leven, Fife since April 2017.

He says that opening this winter may be impossible due to the rising energy bills, which are already above £1,000 a month.

Ant, 56, said: “The issue is the downturn in tourism over the winter and having to heat the house for fewer people.”

“Nobody can book a room at the minute, at this moment in time my guest house is closed.”

Business organisations are also lobbying the Government to act now.

Martin McTague, the national chair for the Federation of Small Businesses, said: “We’re seeing a toxic cocktail of rampant inflation, high taxes, soaring energy costs and shrinking economic growth.”

“Action is needed right now.”

“While the consumer prices rate of inflation bursting through 10 per cent is eye-watering, producer input prices are up by more than double that figure and this will filter through, pushing up the cost of living even more.”

“The cost of living crisis can’t be solved without addressing the cost of doing business crisis.”

“That’s why we need to see a reversal of the hike in National Insurance, a cut in VAT and fuel duty, and help for struggling small firms on energy bills to match that being given to households.”

The energy regulator Ofgem is set to announce the new price cap, which will come into effect from October, this Friday.

Based on Thursday’s gas prices, they think the price cap will hit £4,649.72 next January and £5,856 in April.

It will then fall but remain at stomach-churning levels, hitting £5,235 in July and £5,235 next October.

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