UK Ministers urged to intervene as business energy costs surge 70%

UK Ministers urged to intervene as business energy costs surge 70%
Credit: Christopher Furlong/Getty Images UK cost of living

London (The Brussels Morning Newspaper) – UK Ministers have been demanded to intervene to prevent businesses labouring with gas and electricity prices from going bust, as bills are predicted to be 70% higher next year than before the energy crisis.

How Will the Projected 70% Increase in Energy Costs Affect Small Businesses?

A typical small company such as a pub, restaurant or independent retailer is spending more than ÂŁ5,000 extra a year on bills than before the energy situation that began in 2021, according to research by the forecaster Cornwall Insight.

How Have Business Energy Costs Changed Since the Start of the Energy Crisis?

An average annual electricity invoice for a small business is forecast to strike £13,264 from next April – when most business energy agreements renew – 70% higher than the £7,811 spent before the energy crisis. Wholesale gas costs began to escalate in 2021, before Russia’s full-scale invasion of Ukraine sent them flying in early 2022, pushing the average business cost above £20,000. Typical bills are now £13,170.

Business energy expenses are expected to increase next year as a climb in standing charges feeds through to bills and after gas expenses rose in recent weeks as traders responded to further tensions in Ukraine.

The industry regulator Ofgem stated average annual household bills in Great Britain would increase by 10% from October. Businesses’ energy prices do not have an equivalent cap, with many businesses instead fixing an annual price for at least a portion of their energy needs.

What Measures Are Being Proposed to Help Businesses with Rising Energy Bills?

Craig Lowrey, a principal consultant at Cornwall Insight, stated: “For all the criticism of the household energy price cap, it does provide a level of protection that businesses simply do not have. Given the impact of the cost of living crisis on consumer spending and high street trade, the government will need to seriously consider how to support businesses with their high energy costs if they want to prevent further closures.”

The government interfered in late 2022 to subsidise household and business energy accounts but that support lapsed in April 2023. With the new chancellor, Rachel Reeves, trying to plug a ÂŁ22bn hole in the public finances, a new small company subsidy appears unlikely.

Lowrey stated increasing domestic energy production was the “only way” to lower exposure to international disruption and deliver sustainably lower energy invoices. “While this solution is neither quick nor easy, it is essential for achieving long-term stability in energy costs,” he stated.

How Are Businesses Reacting to the Expected 70% Rise in Energy Prices?

Alex Patrick-Smith, the executive director at the 219-year-old Dreadnought Tiles in Brierley Hill, West Midlands, stated: “Our energy bills have more than doubled since before the energy crisis. Last year we had to cut production and raise prices. I do not think we will see energy costs return to the pre-crisis levels, they will probably reset at a higher level and we expect them to rise again this winter.”

Beth Malcolm

Beth Malcolm is Scottish based Journalist at Heriot-Watt University studying French and British Sign Language. She is originally from the north west of England but is living in Edinburgh to complete her studies.