Massive Increases In Energy Bills Threaten Hundreds Of Thousands Of Businesses

Hundreds of thousands of small businesses say they could be forced to close or downsize as a result of huge increases in energy bills this winter. One in seven small businesses now fear they will have to downsize or close altogether, as experts warned that a wave of bankruptcies and bankruptcies will deepen Britain’s looming recession. The outlook for the UK high street is particularly dire, with only one in three retail and hospitality firms expecting growth next year as shoppers tighten their belts. Huge bill increases now landing on company doormats pose an “existential threat” to many firms facing a “bleak” autumn and winter, the Federation of Small Businesses (FSB) has warned. High street companies – which have struggled to recover from pandemic lockdowns – are now facing a double whammy as consumers are cut due to falling incomes. Cineworld became the latest company to run into trouble this week and is expected to file for bankruptcy within weeks. Economists predict that real average wages will fall by as much as 8 percent, with big drops this year and next, as inflation far outpaces wage increases. Ruth Gregory, senior UK economist at Capital Economics, said she expected wages to continue to shrink until November next year causing households “a lot of pain”. “Never before has real household disposable income fallen by 2 percent in one calendar year, let alone two in a row. This will certainly lead to a fall in real consumer spending,” Ms Gregory said. Martin McTague, director of the FSB, said many firms simply could not cope with both falling demand and huge bill increases. “How is an independent coffee shop supposed to find another £20,000 a year to keep the lights on and the coffee machine going when they’re barely breaking even as it is?” he said. “How can a small manufacturer find another £70,000 to keep the production line running and the staff room heated? With five-figure annual increases in energy costs common, too many small businesses face impossible choices.” The number of small businesses in Britain shrunk by 400,000 last year during the pandemic and the FSB fears a similar amount could disappear due to unaffordable energy. Small companies across the UK have already shared stories of being forced to close after receiving tenfold increases from suppliers. Unlike households, small business bills are not covered by the energy price cap. While large companies can hedge the risk of price changes, smaller businesses typically cannot. An FSB poll found that 14.7 per cent of SMEs believe they will have to downsize or close due to unaffordable energy. Many fear they will also be hit by a plunge in consumer spending as households see their incomes hammered by rising prices, which have pushed inflation to a 40-year high of 10.1%. Nine in 10 companies expect their costs to rise, with two-thirds citing fuel and utilities as the main cause. It comes as the price of natural gas bought ahead of the winter months soared back to record highs, prompting experts to warn that businesses and households face a “once-in-a-generation” solvency shock that means governments must step in to provide broad support. Robin Brown, who owns Yorkin Associates, a parts maker for utility companies, said his energy bill will nearly triple this year. “Dealing with energy bills projected to rise from £36,000 a year to £108,000 is not something that is in any way feasible,” he said. “Added to that, the prices of all the materials we have to buy, including recycled material, are constantly increasing and they will do more to cover their own increases in energy prices. “Unfortunately, in our industry, we’re not like a convenience store or gas station where costs can be covered by even more price increases, our prices have to be relative to the services we support.” Labor has proposed freezing energy bills for domestic customers until April, when it is hoped prices may start to fall. The move will ease pressure on households, potentially boosting businesses as consumers have more money in their pockets. It would also lower the core rate of inflation, but the two Conservative candidates to replace Boris Johnson as prime minister have both rejected the plan. Mr McTague added: “It’s good to see Labour’s announcement acknowledging the unprecedented strain energy costs are putting on small businesses. “However, much more will clearly be needed, and we are yet to see the government step up to the plate and propose a solution to prevent small businesses collapsing and prices soaring due to unfettered spending. “We need direct and immediate support from the government: the extension of energy support issued through the council tax system to the rates system, immediate help with bills for those small businesses that do not pay business rates and the reduction of consumption VAT of energy will make a real difference in this space.” The FSB is also calling for the immediate allocation of unused Covid relief funding to help businesses with rising energy costs.

title: “Massive Increases In Energy Bills Threaten Hundreds Of Thousands Of Businesses Klmat” ShowToc: true date: “2022-12-01” author: “Harry Smith”

title: “Massive Increases In Energy Bills Threaten Hundreds Of Thousands Of Businesses Klmat” ShowToc: true date: “2022-12-12” author: “Martin Noyes”

title: “Massive Increases In Energy Bills Threaten Hundreds Of Thousands Of Businesses Klmat” ShowToc: true date: “2022-12-14” author: “Ken Vanderploeg”