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Sadie Shard, owner of the Crescent Hotel in Scarborough, has weathered economic hardships caused by the pandemic, and now her business faces another risk: sky-high energy prices.
Shard has owned the hotel in the northern British coastal town since 2014 and until November paid between £1,000 and £2,000 a month to power its 20 rooms and restaurant.
But in November, her supplier CNG went bankrupt shortly before her latest energy deal was due to be updated. The company appointed by regulator Ofgem to accept CNG customers said her electricity bills would more than triple, reflecting a surge in wholesale prices. This means her energy bill will be up to £10,000 a month.
CNG, yes 41,000 corporate customers, is one of 26 suppliers on the wall A surge in wholesale gas and electricity prices over the past five months has sparked the biggest crisis in Britain’s energy supply sector in 20 years.
For months, the government has been heavily lobbied by “energy-intensive industries” such as ceramics and steel, which have warned of possible shutdowns if ministers don’t intervene – only to be thwarted by the Treasury.
Now small businesses like Shard’s, which have about 5.5m In the UK, they are also warning of rising energy costs at a time when many of them are still struggling with the pandemic.
Shard managed to negotiate a slight reduction in her tariff — although it was still more than four times what she had previously dealt. She said the overnight increase in her energy costs was “the icing on the cake” after all the hardships the hotel industry has gone through during the last two years of pandemic restrictions.
“We are where we are now [monthly] The energy bill is basically the same as our restaurant’s income [every month] It’s not feasible unless something changes,” Shard said. “It would be ironic if we survived Covid. . . it’s the energy bills that weigh us down. “
The latest from the Small Business Federation quarterly survey, 45% of the nearly 1,300 companies that participated said their costs had increased in the past three months due to higher utility bills, driven by energy prices.
“What we’re seeing is that unplanned billing increases are hitting businesses that are already facing other major headwinds – supply chain disruptions, a 6% rise in inflation, increased late payments from large corporate customers, and the largest small businesses Historical taxes will increase in April,” said Craig Beaumont, head of external affairs for the industry body.
He worries that this additional pressure will force many smaller companies to cut costs, lay off staff or “give up altogether”.
Of particular concern are the smallest businesses with fewer than 10 employees, which do not have the energy management teams or trading departments of larger companies. They may not even have an office manager to help them shop around for a better deal.
These “micro-businesses”, which number an estimated 1.2 million in the UK and employ 4.2 million people, also have less protection for energy purchases than households. For example, the UK’s energy price cap does not apply to them.
The cap, which was introduced in 2019 and is adjusted twice a year in October and April, means that many of the big increases in wholesale gas and electricity prices over the past few months won’t hit households until spring, when bills tend to increase with heating decrease in demand.
Businesses often enter into custom contracts with suppliers that can expire at any time of the year. However, a large energy supplier told the FT that the bulk of the deals closed on April 1 and October 1.
“April will be the next big crunch, with business going from low contract prices to high renewal rates,” the supplier said.
EDF Energy, the UK’s fourth-largest energy provider, said many businesses were fortunately still signing multi-year contracts but were “concerned” about those who would renew their contracts in the coming months.
The government is always looking for ways to mitigate rising energy costs. Commerce Minister Kwasi Kwarteng has been in talks with suppliers and Ofgem on how to soften the blow to households from high energy prices in April. From that month, the consumer price cap is expected to rise by around £700 to £2,000 a year, unless mitigation measures can be agreed.
Kwarteng also agreed to a short-term bailout Britain’s largest producer of carbon dioxide fears the shutdown due to rising energy costs could lead to disruptions in key gas-dependent industries, including meat and health.
Small business owners argue they need the minister’s help too. The FSB joins a growing number of voices from energy companies and politicians who are pushing for a 5% cut in the VAT rate on energy bills. But it also wants to see other measures, such as part of a “remediation fund” overseen by Ofgem for micro-businesses struggling due to high energy costs, and an energy price cap for the smallest companies.
Back in Scarborough, Shard says she’s trying to stay optimistic after an already “tricky” few years. “We’re just trying to take each day and try to move forward,” she said.
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