Small business owners across Britain have told of sleepless nights and fears they will not survive the winter due to looming increases in their energy bills.
Firms have experienced a 424% rise in gas costs and 349% increase in electricity since February 2021, data from the Federation of Small Businesses (FSB) shows.
Thousands of traders are looking to renegotiate electricity and gas contracts that expire in October as two-year fixed-price supply deals come to an end.
Companies do not have a cap on their energy bills, unlike domestic consumers who will learn the next Ofgem price cap rate on Friday, leaving them at the mercy of whipsawing wholesale gas markets.
Small firms in the UK have raised the alarm over the risk posed to their future. They include:
A hotel in Aberdeen which says it will be cheaper to close for the winter than heat rooms for guests.
A fish and chip shop in Oswestry, Shropshire, where annual energy bills are rising from £9,000 to £35,000.
A chicken takeaway franchisee in Peterborough who fears customers will desert him if he pushes up prices to pay his bills.
An indoor mushroom farm in Bangor, Gwynedd, whose strong trading has been undermined by a “ridiculous” hike in its energy costs.
Paul Bright, who owns the Glasgow bar and restaurant Strip Joint, said the problem was bigger than the pandemic, and from December his annual bill will rise from £22,000 to £80,000 if he stays with E.ON.
“No one is surviving that,” he said. “The only thing that’s keeping me sane is that no one can survive that – something has to be done.”
Companies typically fix the price of the energy costs for between one and five years to insulate themselves from volatile market conditions. This has meant many businesses have managed to keep costs stable during the energy crisis, which began in late 2021.
UK gas prices have hit record highs of more than 700p a therm, compared with just over 100p a year ago.
However, the consultancy Cornwall Insight said businesses that fixed prices in mid-2020 are expected to see a fivefold increase in October when contracts come up for renewal. About 70% of companies renew their fixed-term deals in October, which is a legacy of the industry’s privatisation. Some businesses have been asked to pay a large deposit to secure a new deal.
The FSB has called on the government to step in with financial help. It wants the higher-threshold rate of VAT reduced from 20% to 5%. The lower threshold and domestic rate of VAT could be reduced from 5% to 0%, it said.
The body also suggested business rates rebates; a similar mechanism to the domestic price cap brought in for companies; or a scheme to support businesses to decarbonise with £5,000 vouchers to be spent on items such as solar panels and heat pumps.
Daniel Mussard, the owner of the eight-bedroom Bennachie Lodge hotel near Aberdeen, says its energy bill of £2,780 will rise above £6,000 from November and that is before the cold weather begins. “There are only so many cutbacks we can make before we simply do not have enough staff to run the operation,” he said. “It is the prospect of it costing more to run than we make that is a real and imminent concern which simply means we make less of a loss by closing the doors.”
Muhammad Kamran Zahoor, who has been running a branch of the Sam’s Chicken takeaway franchise in Peterborough since last year, said he was having sleepless nights over the rise in energy costs. Zahoor’s electricity costs with British Gas will rise from an average of £1,500 to £5,000 a month when his current contract ends in January. He said: “There is no possibility that my business and thousands of businesses like mine could survive.”
Connor McCrorie, who runs the Sporeshore indoor mushroom farm in Bangor, said the business would be doing “extremely well” were it not for skyrocketing energy bills.
He said: “We’ve been commercially sound for two years, but my electricity bill increased from £300 a month to over £900 and some months £1,000, it’s ridiculous. I have cut as much as I can but it’s still incredibly high.”
At the Salop Fish Bar in Oswestry, Harry Haralambous says his annual energy costs are going from £9,000 to upwards of £35,000. His contracts with British Gas and SSE ended this summer, putting him at a disadvantage against competitors whose fixed-term deals may not end until next year.
The business has been in the family for 46 years and, determined to keep going, he has been left with no choice but to put up prices. But footfall and spending are declining. “People are starting to tighten up their purses, and buying cheaper things as well – for example, instead of fish and chips, sausage and chips. Now we’ve put prices up, it’s waiting to see if people will come back.”
Shamim Gammage and his wife, Eleanor Weil, set up a business last year producing vegan frozen ready meals from their commercial kitchen in the Cotswolds.
The fledgling company, Dovebrook, with four full-time staff and one part-timer has just won four Great Taste awards for its plant-based meals, and should be primed to grow very quickly this year, but its bills are about to increase from £450 to as much as £4,000 a month. “We are going to fit solar panels to our roof to take some of the sting out, but not everyone has the £30k to do that, and not everyone owns the building they are in.”
Lisa Allsop and her husband, Ian, who run a garden centre, farm shop and cafe in Snowdonia national park and employ four part-time staff, said they were unable to get a quote from their supplier, E.ON.
“Our current bill is about £300 a month,” said Lisa, “so we’re dreading what the increase will be.”
Tina McKenzie, the policy and advocacy chair of the FSB, said: “Examples of small firms having to close due to their gas and electric bills are piling up, each one a sad loss to the community and the wider economy. The damage that will be caused by this toll rising even further risks wider contagion.
“Current government inaction is just not good enough. Inaction risks devastation, and the avoidable loss of the small firms that add vibrancy and character as well as employment and vital services to local communities.”
