Businesses have warned they will have to cut hours due to high energy bills before government aid is scaled back.
Businesses will be given a discount on wholesale prices from Saturday as the government said the current system of capping costs was too expensive.
The boss of knitwear manufacturer Jack Masters in Leicester told the BBC he had already switched to a four-day work week after his annual energy bill tripled.
“We’re stuck. We want to produce more, but it will cost more,” the company said.
Business groups have warned thousands of firms they may have to downsize or shut down altogether if support becomes less generous.
In 2021, Jack Masters said it spends around £60,000 a year on energy for the company, now you’re looking at an annual bill of between £180,000 and £200,000.
“We’ve reduced the number of days we turn on our gas boiler and we’ve had to reduce staff shifts,” said Snahal Patel, managing director of the family business that specializes in making Christmas jumpers.
The Treasury says bills under the new scheme will automatically be reduced by up to £6.97 per megawatt-hour (MWh for gas bills and up to £19.61 per MWh for electricity).
Heavy energy consumers such as steel and glass manufacturers receive a larger discount than other sectors.
Mr Patel said his firm has benefited from government support but said his bills are still unsustainably high and are threatening the company’s future growth.
“What are we going to do in the next 12 months? I think we’re going to reduce overall investment and I doubt we’ll be hiring unless we get some really big new orders,” he said.
In Leicester city center, Shaf Islam is also struggling with the impact of high energy costs for its Chutney Ivy restaurant. His bill has quadrupled from £1,000 in 2021 to around £4,400 this year.
“It leaves us with absolutely nothing,” he said.
“It puts pressure on us when other big bills like VAT come due. And we’re dealing with huge food price hikes at the same time,” he said.
“We also can’t decorate the restaurant or buy new furniture, which we would like to do,” he added.
At the end of last year, gas and electricity prices were so high that Shaf jumped at the chance to keep costs down by contracting at a lower rate.
Since then, wholesale energy prices have fallen significantly, although they are still historically high, leaving Mr. Islam locked into his expensive contract for a year.
“Prices were everywhere last year. At one point they were eight times what I paid,” he said.
“We pounced on a contract that only offered us four times what I paid. But now prices are down and I feel trapped,” he added.
Mr Islam would like the opportunity to renegotiate his contract and he is not alone. The Federation of Small Businesses (FSB) estimates that over 300,000 businesses that secured expensive contracts last year may have to downsize, restructure or even close in the coming months.
She urges energy companies to show leniency to companies holding on to high contracts.
“There is a lot that could and should be done instead of abandoning small businesses,” said Tina McKenzie, FSB policy chair.
“Allowing the most vulnerable small businesses to renegotiate or ‘shuffle and expand’ their energy contacts to better reflect wholesale energy prices is the least the government and utilities could do,” she added.
A government spokesman said: “Businesses large and small will benefit from the base rebate through our new energy billing system and will not have to apply for it, and the most energy- and trade-intensive businesses will receive a higher level of support at all sizes.”
Energy UK, which represents energy companies, said they would continue to work with regulator Ofgem, the government and business groups on these issues.
“It’s a commercial problem for suppliers when contracts have been agreed and signed and energy has already been purchased – but suppliers are trying to find innovative solutions to help customers pay their bills,” it said.
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