Thousands of small businesses risk going bust as “brutal” energy bills are to double with the end of a government support scheme from this weekend.
Companies are braced for an increase in energy costs as the government’s support for non-household energy bills falls away, and many fixed rate deals come to an end. The combined impact could drive energy bills for many companies up by as much as 133% , according to analysts at the consultancy Cornwall Insight.
Craig Lowrey, a principal analyst at Cornwall Insight, said the “worst-case scenario” would be “especially brutal” for companies that locked in to their fixed bills during the energy market peak last year and who would “no longer be able to count on the safety net of government support”.
Julian Pariera, the owner of Beauchamp Laundry Services in Birmingham, said: “It will dramatically affect our business.” Pariera told the Guardian in late 2021 that the energy cost crisis was likely to drive the company’s energy bills up fourfold. Since then, his gas bills have climbed almost five times higher, he said.
“We’ve already had to put our prices up by 25%, which means some customers who would come in to do laundry every two weeks are now waiting to wash once a month. We can’t put our prices up any more. We know that many of our customers are vulnerable and are feeling squeezed, and we just can’t squeeze them any more,” he said.
Energy costs are also a big burden for the hospitality industry, which was already hit hard by the Covid-19 pandemic, leading to a rash of pub closures across the UK.
“This is the end of the independent village pub,” one publican said. The pub owner asked not to be named because he expects the financial toll of the energy crisis will force him to sell his pub to a developer interested in converting the building into a block of flats.
“We won’t be here for long. At the moment we’re putting our own money into the pub to keep it going, but it will fail. It’s a matter of how long we’re willing to go on. There are pubs going under every day. Soon we’ll be back to the 90s when tenants were just leaving their keys behind,” he said.
The government stepped in to protect businesses from the soaring cost of energy after Russia’s invasion of Ukraine last year but the scheme will be replaced from Saturday.
The scheme, which launched in October, was described by chancellor Jeremy Hunt as “unsustainably expensive” because it capped the cost of electricity and gas at an estimated £18bn for six months. Under the new scheme, companies will receive up to £5.5bn of support over the next year.
The government on Saturday launched a campaign to help struggling small and medium-sized businesses manage their energy costs, which will offer guidance on how to save energy such as installing light and heating timers, or turning down boiler flow temperature and changing lightbulbs.
The campaign was described as “bullshit” by one indignant business owner, who declined to be named.
“The government seems to be showing parental concern, but it’s a red herring,” Pariera said. “I sat in a restaurant the other day and realised it was more cold and dim than usual – then I realised they were trying to save energy. Everyone who can do these things has already started.”
The hospitality sector is facing a £7.3bn hike in energy bills as the government’s support comes to an end, according to UK Hospitality, which could drive thousands of venues out of business. The group’s analysis shows that the sector’s energy costs are £12bn a year higher than before the crisis.
Kate Nicholls, chief executive of UKHospitality, said: “The energy crisis has suffocated businesses over the past year, causing thousands to fail and forcing many more to take drastic measures to afford extortionate energy bills.”
