‘Panic not over’ on energy prices for some small firms

Gas and electricity costs for UK businesses, charities and public bodies are to be capped as part of a new government package.

Chancellor Kwasi Kwarteng has hinted the move could prevent businesses from collapsing under the weight of soaring energy bills this winter.

While some trade associations welcomed the news, others like UK Hospitality warned the government must avoid a “cliff” when the six-month aid ends at the end of March.

The BBC has spoken to several companies across sectors about what the announcement could mean for them.

At Ye Olde Fleece Inn in Kendal, Cumbria, they haven’t done the math yet but are relieved to have more certainty.

The steep rise they have faced – from £44,000 a year for gas and electricity to around £124,000 a year – will be avoided for the time being.

“Having some help coming gives us a little bit of hope,” says Josh Farrant, Front of House Manager. “But we still have to take a massive look at how we’re doing things.”

Customers are already giving up sourdough toast — the cost of running the grill is “ridiculous at current prices,” Mr Farrant says.

They look at other kitchen appliances and whether they can rely more on the pub’s log fires and less on the central heating.

And while government support is very welcome, Mr Farrant still has concerns, particularly about what will happen in a couple of months.

“It doesn’t mean the panic is over,” he says. “It runs for six months, then we’ll see.”

Kate Phillips is relieved to have “a reprieve” for the rising costs of running her chain of indoor climbing walls.

“In the medium term, that means we can heat up a bit this winter,” she says. “Our original plan was to warn our customers to bring warm jackets.”

This may still be necessary in the spring. Heating these vast indoor spaces costs a lot and the help is only temporary.

“It’s all a little bit last minute, all a little bit ‘last minute’, which leaves us not sure what’s going to happen in six months time,” she says.

Climbers don’t want it as warm as they do in a gym, Kate explains, because they don’t want their hands to sweat. “But they want to be able to feel their fingers.”

The chain still has some fixed-price electricity deals, so Ms Phillips is trying to see if they can save more by investing in more electric heating.

She hopes this leaves some “wiggle room” to offer more hours or to hire new staff in the winter, when they are busiest.

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“That doesn’t help us at all!” says Nimisha Raja, founder of Nim’s Fruit Crisps, who wasn’t impressed with the level of intervention.

Air drying chips consumes large amounts of energy and gas is its biggest cost.

She points out that the system doesn’t offer help with daily subscription fees – the fee customers pay to connect to the energy grid.

“When we signed a new contract on April 1st the only option available to my business was one with a base fee of £14 per day.”

The company’s gas bills have risen from an average of £2,500 a month to around £7,500, she says.

She would have wished the government had taken bolder action, including energy market reform or a higher windfall tax on energy companies that benefit from higher prices, a move the new prime minister has ruled out.

“Small and medium-sized businesses need a little more from government,” says Ms. Raja.

“What will – and is already slowing – growth across all sectors is crippling energy costs, which are forcing many small businesses to close.”

Angie Monroe, who runs a small salon in Stourport, Worcestershire, says her energy bills have tripled in the past year to an average of around £280 a month over the summer.

“I’m mainly here to serve customers,” she says, “but I predict my bills will double again in the winter, even with the energy cap for heating and the appliances we have to use. “

It’s already a struggle to make ends meet as the cost of hair dye and gloves has increased recently.

“It’s frustrating because I want to know why that is [scheme] was not set up earlier,” says Ms. Monroe.

Above all, she wonders what will happen in the long term after the aid package expires next March.

“We may feel safe for this time, but many companies out there will still be concerned and wondering what their bills will look like going forward.

Tina McKenzie, Chair of Policy and Advocacy at the Federation of Small Businesses, said: “Small businesses are the very definition of vulnerable when it comes to these energy price hikes.

“[They do not] have the ability to hedge or negotiate energy prices, so we will encourage the government to continue helping small businesses in all different sectors after the six months are up.”

Many still face “a tough year,” she says.