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Business

Energy bills are stressing businesses and people as UK costs rise




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

Bloomberg | Bloomberg | Getty Images

LONDON — Small businesses across Britain are struggling to make ends meet in the face of skyrocketing energy bills, rising costs and rapidly declining purchasing power.

New data on Wednesday showed UK inflation jumped to a 40-year high of 1[ads1]0.1% in July as food and energy costs continued to rise, worsening the country’s cost-of-living crisis.

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

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

Real wages in the UK fell by 3% annually in the second quarter of 2022, the sharpest decline on record, as wage rises failed to keep pace with rising living costs.

A new survey published on Friday also showed that consumer confidence fell to the lowest level since records began in 1974.

“Absolute Madness”

“Although the energy price hikes do not affect businesses directly, millions of small business owners are still experiencing increased energy bills at a time when costs are increasing in most areas of operation,” said Alan Thomas, UK managing director of insurer Simply Business.

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

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

The business has seen energy costs rise 90% so far since the war in Ukraine began, Gammon told CNBC on Thursday, and the owners are bracing for further increases in the coming months.

“We are combating the rising costs by switching everything to LED, solar panels, wind turbines (planning in progress) and shutting down unused systems,” Gammon said.

“We have also had to increase the prices of the products – most of these have been livestock, as they now cost more to look after.”

Customers are increasingly withdrawing from keeping fish and reptiles because of the maintenance costs, and on Wednesday the store had a customer bring in a snake they could no longer afford to care for.

The rising costs forced Lincs Aquatics to close a store in East Yorkshire, laying off several workers, while it tried to offer pay rises to staff at its two remaining Lincolnshire sites to help them through the crisis.

The business is also working to expand its online store due to rising in-store maintenance costs, as heating water for marine aquariums and purchasing pumping equipment become increasingly expensive.

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

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

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

BCC Director General Shevaun Haviland added that “the red lights on our economic dashboard are starting to blink,” with almost every indicator deteriorating since the March survey.

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

He told CNBC earlier this week that for the first time in 10 years he had been unable to get a better deal for a client than their non-contract price – the typically expensive prices paid when a business or individual doesn’t have a signed deal in place .

“I think the unit price she quoted was 60p [pence] a unit for gas, which is just ridiculous. I can imagine that a year ago we would have looked at 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 is just going ballistic. Nobody’s going to buy it.”

Gas costs for both businesses and consumers are only expected to increase through the colder winter months. Speed ​​noted that local cafes that cook 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”

Rail strikes have already brought the country to a standstill for several days over the summer and look set to continue, while postal workers, telecoms engineers and dock workers have all voted to strike as inflation eats away at real wages.

Conservative leadership favorite Liz Truss was forced earlier this month to dramatically reverse a plan to cut public sector pay outside London, which would have reduced pay for teachers, nurses, police and the armed forces.

Local authorities recently offered support staff at state schools a flat pay rise of £1,925 a year, meaning a rise of 10.5% for the lowest paid staff and just over 4% for the highest earners, following pressure from three of the country’s biggest trade unions.

A woman in her early fifties — a member of support staff at a state school in Lincolnshire who asked not to be named because of the sensitive situation and concerns about public reprisals — told CNBC that years of real pay cuts had left many low-paid public employees struggling to make ends meet.

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

While the 10.5% 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 increase her rent by £40 a month, which she had not agreed to and which may mean she has to sell her car to cover basic living expenses.

She called on the government to temporarily reduce the “standing charge”, a fixed daily amount households must pay on most gas and electricity bills regardless of how much they actually use, and to step up efforts to recover one-off taxes. from energy companies such as BP, Shell and Centrica, which are reporting record profits.

“I think this is an even bigger crisis than [the Covid-19 pandemic]because this is going to affect not only lower incomes, but maybe also middle incomes, because I don’t see how anyone can absorb such energy costs, she said.

The pressure on businesses and the government to raise wages in the face of skyrocketing living costs has fueled further concerns that inflation will be entrenched – but this concern is far from the reality that working families are increasingly being forced to cut back on necessities.

“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 for people to survive is if their wages go up,” the woman said.

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

The situation in recent months, even before the expected worsening of the energy crisis, has already begun to take a toll.

“I just think that I’m a very honest, hard-working person. I’ve never committed a crime, always done things right, but now I’m starting to feel like that doesn’t get you anywhere in this country,” she said.

“For the first time in my life I want to go out and march in protest and scream really loud at somebody and you just think ‘what’s going to happen?’



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