Thousands of small businesses across the country are facing the possibility of closure, as energy bills have risen to levels that many owners are finding difficult to pay.
Unlike for residential homes, company energy tariffs are not capped, leaving some business owners facing an increase in bills of more than 350%.
We talk to three small traders about how they are dealing with the sharp rise in energy prices – and their hopes for keeping their business going over winter.
Weeping Cross Fish Bar, Stafford
“I just don’t know how I can stay in business,” says John Evans of the Weeping Cross Fish Bar in Stafford.
“We are a small 5m by 10m takeaway-only premises. The renewal on our gas has just come through. It has gone from £9,000 to £32,000 a year. I can’t sleep at night.”
Before the rise in gas bills, chip shops had already been hit by Russia’s invasion of Ukraine, which has caused a doubling in the price of some fish and cooking oil. Meanwhile the UK’s drought has pushed up prices of potatoes by 25%.
To add to Evans’s scaling costs, a 35% tariff has been imposed on Russian cod landed in the UK – and Scandinavian suppliers have hiked their prices, too.
Evans’s shop is one of 10,500 across Britain employing about 100,000 people and serving 182m fish and chip portions per annum. He says his customers simply won’t be able to afford the huge price rises needed if they want to stay in business.
“I’d have to charge £12.95 for a fillet of haddock just to break even,” says Evans.
The industry is demanding help from the government, such as a cut in the VAT rate, which was reduced to 5% during the Covid lockdown but has since returned to 20%.
Andrew Crook, president of the National Federation of Fish Friers, says: “The current VAT system is nearly 50 years old and is outdated … We don’t want handouts, and a temporary reduction just prolongs the life of a system that is not fit for purpose.
“My members feel abandoned by the government. If we lose independent fish and chip shops and other hospitality businesses it will be a major loss to the social fabric of the country.”
In the absence of government support, Evans shares the pessimism about the future of his trade. “We are a standalone community shop, in business for 23 years with a great footfall, but this may finish us,” he says. “There is going to be a mass exodus from the business over the next six months.”
Hot Chocolate Tanning Studio, Lincoln
Lucy Wilkinson has seen off recessions, downturns and a global pandemic during nearly 18 years running Hot Chocolate Tanning Studio in Lincoln but rocketing electricity costs are now making her fear for the survival of her business.
The salon owner has just signed a new contract with energy supplier E.ON, before her existing one expired, and is now facing an additional £55,000 of annual costs for electricity alone.
Over the previous year, Wilkinson’s electricity bill was just under £18,300. From early December when her new contract kicks in, it will soar to almost £74,000.
“It’s an increase of 350%,” said Wilkinson. “I’m going to be spending a third of my income on electricity.
“If we do exactly the same amount of trade as in previous years, there isn’t even enough profit in my business to cover it. That’s why it’s so scary.”
The salon boasts 10 electricity-guzzling sunbeds, allowing customers to tan while lying down and standing up, as well as fans to keep the rest of the premises cool. Open seven days a week, in peak summer season the shop welcomes as many as 250 people each day.
“I think I was in denial about how bad it was going to be. I didn’t realise what the increase would be until I put it in a spreadsheet,” she said. “Obviously, I was shocked.”
The 43-year-old is trying to cut back her costs in the salon where she employs seven people. Staff are needed seven days a week to check in customers, show them how to use the tanning beds, and clean the rooms and beds after each client.
“What I really don’t want to do is touch my staff,” she said. “A lot of customers come because they like the staff and the customer service they get.”
Wilkinson has just raised her prices by 15p – more than any previous single price increase – but doesn’t believe this will cover her extra energy costs, and may send customers to the competition.
With two years left on the shop’s lease, the salon owner is focused on getting her business through the next difficult period.
“The fact I am tied in for two years [on her current energy contract] really scares me. Can I survive for that time? I don’t know.”
The New Clarence pub, Hull
The prospect of rising energy bills is weighing on Ian Ibbetson’s mind.
“I can’t switch off at the moment,” Ibbetson said. “I’ve had to cut back staff hours and there always seems to be something for me to do.”
In the first year after taking over the pub in September 2020, Ibbetson paid £9,000 for energy. By the time he came to renegotiate his contract last November, gas prices were already on the rise, and so his bill more than doubled to £21,000.
Now his annual contract is up for renewal again, and he’s started to call energy suppliers, worried that his costs are set to double yet again.
“I am not going to renegotiate the lease until I know what to budget for energy bills next year. Is it worth the risk?”
Even though the pub has shortened its opening hours in a bid to cut back on energy use, a doubling of energy costs “would be a substantial difference and would force a rethink”, Ibbotson said.
The 63-year-old is trying to attract more punters through events such as a monthly comedy night and live music on Sunday afternoons, but he has already noticed the impact of the cost of living crisis, as regulars come in less often and there is less passing trade. “It’s a double whammy when everything is costing so much more, and customers have less to spend.”
Ibbotson, who also has a business producing chilli sauces, is holding out for help from ministers.
“Unless there is some sort of help from government, that would be the final straw. I don’t see how the government can sit on their hands and do nothing,” he said.
“You can keep fighting, but there comes a time when common sense has to take over. Much as I love this place and want to turn it back into a thriving and successful community pub, at the end of the day I have to run the business with my head and not my heart. But we haven’t given up yet.”
