As companies are not covered by the energy cap, many are facing eye-watering price rises that threaten profitability and, in some cases, their very existence.
Last Friday, the energy regulator Ofgem announced a huge rise in the energy price cap; as a result, starting in October, a typical household will pay £3,549 a year for gas and electricity, compared to the current £1,971 figure. There have also strong suggestions that the cap will rise again in January and April 2023, which will inevitably put many people’s household finances under considerable strain and impact both consumer confidence and spending.
However, there is another – arguably even greater – threat for businesses across the UK, as firms are not covered by the energy price cap. This means that companies and retailers coming to the end of fixed-price energy contracts are facing massive increases that some businesses have already admitted they will struggle to pay.
Posting on LinkedIn, Sambro CEO Paul Blackaby summed up the situation facing many UK toy companies and retailers perfectly: “There seems little doubt that the energy crisis in the UK is emerging as an existential threat to the financial situations of many businesses and many individuals. The cost increases that businesses and people are facing are extraordinary. As with many organisations, the business that I am fortunate to lead is coming to the end of a two year fixed term deal where we have paid £35k pa for gas and £59k pa for electricity.
The best quotation that we have currently received, for a renewed two year deal, is £265k for gas and £297k for electricity; increases of 657% and 403% respectively. At home, I thought it might be interesting to assess the availability for a fixed deal, only to be quoted £14,400 per annum; for an average, four bedroom estate house in the North West – an increase of more than 600%.
The price of energy has, of course, been weaponised by the Russian’s in response to Europe’s support for Ukraine, but surely the UK government cannot expect half the country to go bust? That doesn’t make any sense at all, despite the disgraced current PM urging of us all to endure the cost of living crisis in support of Ukraine. The market for energy is broken and the government must act now to support and protect people and businesses from it. This is no time for political dogma or ideology. Practical, workable solutions are required. It will be too late to act very soon.”
Some businesses are also reportedly facing demands for hefty upfront payments for their gas and electricity bills. According to Retail Gazette, some major energy providers, including SSE and EDF, are requesting deposits from retailers amid fears that the crisis will cause many small businesses to collapse.
An EDF spokesman is quoted as saying: “In some cases, for example where the customer has a poor credit score, we will request a security deposit (usually equal to around three months estimated energy spend) to permit a contract to be sold.”
So far, the candidates to take over as the next Prime Minister have offered little in the way of practical support for households, but nothing at all for businesses – it is to be hoped that they recognise the scale of the problem facing companies and offer real-world solutions very soon – otherwise a modest cut in the Corporation Tax rate will ring hollow with companies forced to close because they can’t meet these astronomical demands.
