Energy bills weigh on businesses and individuals as UK costs soar


A high street decorated with British Union Jack banners in Penistone, UK. The End Fuel Poverty Coalition has warned that “a tsunami of fuel poverty will hit the country this winter”.

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LONDON – Faced with rising energy bills, rising costs and rapidly declining consumer purchasing power, small businesses across the UK are struggling to make ends meet.

New data released on Wednesday showed UK inflation hit a 40-year high of 10.1% in July as food and energy costs continued to soar, deepening the crisis the cost of living in the country.

The Bank of England expects consumer price inflation to peak at 13.3% in October, the country’s average energy bills (set via a price cap) are expected to rise sharply in the fourth quarter to possibly exceed an annual amount of £4,266 ($5,170) at the start of 2023.

On Wednesday, a director of British energy regulator Ofgem resigned over its decision to add hundreds of pounds to household bills, accusing the watchdog of failing to strike the “right balance between consumer interests and interests of suppliers”.

Real wages in the UK fell by 3% a year in the second quarter of 2022, the biggest drop on record, as wage increases failed to keep pace with the rising cost of living.

A new survey released on Friday also showed consumer confidence had fallen to its lowest level since records began in 1974.

“Absolute madness”

“While energy price caps do not apply directly to businesses, millions of small business owners are still experiencing rising energy bills at a time of rising costs in most areas of operation. “said Alan Thomas, UK CEO of insurance company Simply Business.

“At the same time, consumer spending power is falling as Britons cut back on non-essential spending, hurting the books of SMEs [small and medium-sized enterprise] owners.”

This assessment was echoed by Christopher Gammon, e-commerce manager at Lincs Aquatics – a Lincolnshire-based store and warehouse supplying aquariums, ponds and marine livestock.

The company has seen its energy costs rise by 90% since the start of the war in Ukraine, Gammon told CNBC on Thursday, and its owners expect further increases in the coming months.

“We are fighting rising costs by switching everything to LEDs, solar panels, wind turbines (planning underway) and shutting down unused systems,” Gammon said.

“We also had to raise the price of produce – most of it was livestock as it now costs more to maintain.”

Customers are increasingly forgoing keeping fish and reptiles due to the cost of maintenance, and on Wednesday the store asked a customer to bring in a snake he could no longer afford to care for.

Soaring costs have forced Lincs Aquatics to close a store in East Yorkshire, laying off several workers, while trying to offer pay rises to staff at its two remaining locations in Lincolnshire to help them get through crisis.

The company is also striving to expand its online store due to rising in-store maintenance costs as water heating for marine aquariums and the purchase of pumping equipment become more and more expensive.

In early July, a quarterly UK Chambers of Commerce survey found that 82% of businesses in the UK saw inflation as a growing concern for their business, sales growth, investment intentions and long-term confidence in terms of slowing turnover.

“Businesses are facing an unprecedented convergence of cost pressures, with the main drivers coming from raw materials, fuel, utilities, taxes and labor,” said David Bharier, head of research at BCC.

“The ongoing supply chain crisis, exacerbated by the conflict in Ukraine and lockdowns in China, has further aggravated this situation.”

BCC chief executive Shevaun Haviland added that “the red lights on our economic dashboard are starting to flash”, with almost all indicators deteriorating since the March survey.

Phil Speed, an independent distributor for full-service company Utility Warehouse, based in Skegness, England, liaises with brokers to source energy deals for business customers.

He told CNBC earlier this week that for the first time in 10 years he was unable to secure a better deal for a client than his out-of-contract rate — the high rates typically paid when a company or an individual does not have a contractual arrangement in place.

“I think the unit rate she was quoting was 60p [pence] one unit for gas, which is just ridiculous. I imagine a year ago we would have watched 5 or 6p. It’s just absolute madness,” Speed ​​said.

“We have no idea what’s going to be presented to us, because we have no idea what’s going to happen. The price just gets ballistic. Nobody’s going to buy it.”

The cost of gas for businesses and consumers is only expected to increase during the coldest winter months. Speed ​​noted that local cafes cooking on gas are likely to struggle as they have no choice but to continue using it unless they can replace gas appliances with electric ones. .

“Scream very loudly at someone”

Railway strikes have already paralyzed the country for several days throughout the summer and are expected to continue, while postal workers, telecommunications engineers and dockworkers all voted in favor of the strike as the inflation erodes real wages.

Tory leadership favorite Liz Truss was forced earlier this month into a dramatic U-turn on a plan to cut public sector wages outside London, which would have slashed wages for teachers, nurses , police and armed forces.

Local authorities recently offered state school support staff a flat rate pay rise of £1,925 a year, meaning a 10.5% increase for the lowest paid staff and just over 4% for the highest paid, after pressure from three of the country’s largest unions.

A woman in her 50s — a member of support staff at a Lincolnshire state school who asked not to be named due to the sensitive situation and concerns about public retaliation — told CNBC that Years of real pay cuts had left many low-paid public sector workers struggling to make ends meet.

The UK government in 2010, in the aftermath of the global financial crisis, announced a two-year wage freeze for public sector workers, followed by a 1% average cap on public sector pay which was lifted in 2017, with average wage increases increasing to around 2% by 2020.

While the 10.5 per cent increase for the lowest paid school support staff will ease the pressure, the woman said her energy costs had doubled and her private landlord had tried to raise her rent by £40 per months, which she had not accepted and which may mean that she would have to sell her car to cover her basic living expenses.

She called on the government to temporarily reduce the “permanent tax”, a fixed daily amount that households must pay on most gas and electricity bills, regardless of their actual consumption, and to step up efforts to recover unique “exceptional taxes”. energy companies such as BP, Shell and Centrica, which are posting record profits.

“I think it’s an even bigger crisis than [the Covid-19 pandemic]because it’s going to affect not just low-income people, but maybe even middle-income people, because I don’t see how anybody can absorb those kinds of energy costs,” she said.

Pressure on business and government to raise wages in the face of soaring costs of living has raised new concerns about entrenched inflation – but that consideration is far removed from the reality for families. of workers who are increasingly forced to cut back on essentials.

“It’s fine to say ‘we can’t keep raising people’s wages, it will make the cost of living worse’, but the cost of living is already out of control, and the only way people can survive is that their pay goes up,” the woman said.

“I know it’s a catch 22, but I don’t really see how to get around it – you have to eat.”

The situation of the last few months, even before the anticipated worsening of the energy crisis, has already begun to make itself felt.

“I just think I’m a very honest and hardworking person. I’ve never committed a crime, I’ve always done things right, but now I’m starting to feel like it’s going nowhere in this country. “, she said.

“For the first time in my life, I want to go out and demonstrate in protest and yell really loud at somebody, and you’re just like, ‘what the hell is this?'”


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