A high street decorated with British Union Jack Bunting in Pennystone, UK. The End Fuel Poverty Coalition has warned that “a tsunami of fuel poverty will hit the country this winter.”
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LONDON – Faced with rising energy bills, rising costs and rapidly declining consumer purchasing power, small businesses across the UK are struggling to make ends meet.
New data on Wednesday showed UK inflation hit a 40-year high of 10.1 per cent in July as food and energy costs continued to rise, fueling the country’s cost of living crisis.
The Bank of England expects consumer price inflation to top out at 13.3% in October, with the country’s average energy bills (set through the price cap) expected to rise sharply in the fourth quarter to eventually initially exceed £4,266 ($5,170) a year. 2023.
On Wednesday, the director of UK energy regulator Ofgem resigned over his 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 an annual 3% in the second quarter of 2022, the sharpest fall on record, as wage growth failed to keep pace with the rising cost of living.
A new survey published Friday also showed consumer confidence fell to the lowest level since records began in 1974.
“While energy price caps do not apply directly to businesses, millions of small business owners are still experiencing rising energy bills at a time when costs are rising in many operational areas,” said Alan Thomas, UK CEO of insurance firm Simply Business.
“At the same time, consumer purchasing power is waning as Brits cut back on non-essential spending, hurting the books of SMEs. [small and medium-sized enterprise] Owners.”
This assessment was echoed by Christopher Gammon, e-commerce manager at Lynx Aquatics – a Lincolnshire-based store and warehouse that supplies aquariums, ponds and marine livestock.
The business has seen its energy costs rise by 90% since the start of the war in Ukraine, Gammon told CNBC on Thursday, and its owners are bracing for further increases in the coming months.
“We are combating rising costs by switching to LEDs, solar panels, wind turbines (planning in progress) and shutting down unused systems,” Gammon said.
“We’ve also had to increase the cost of production – most of these are livestock because it’s costing more to look after them.”
Customers are shying away from keeping fish and reptiles because of the cost of maintenance, and on Wednesday a customer brought a snake to the store that they could no longer care for.
Rising costs have forced Lynx Aquatics to close a store in East Yorkshire, laying off several workers, as it tries to offer a pay rise to help staff cope with the crisis at its two remaining locations in Lincolnshire.
The business is also working to expand its online store as water heating and pump equipment for marine aquariums become more expensive to purchase, due to rising maintenance costs at the store.
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 sales growth, investment intentions and long-term business confidence all slowing.
“Businesses face an unprecedented convergence of cost pressures, with the main drivers coming from raw materials, fuel, utilities, taxes and labour,” said David Varrier, head of BCC research.
“This is further complicated by the ongoing supply chain crisis exacerbated by the conflict in Ukraine and the lockdown in China.”
BCC director-general Chevan Haviland added that “red lights are starting to flash on our economic dashboard,” with nearly every indicator deteriorating since the March survey.
Phil Speed, an independent distributor for multiservice company Utility Warehouse, based in Skegness, England, contacts brokers to find energy deals for business clients.
He told CNBC earlier this week that for the first time in 10 years, he was unable to get a better deal for a customer than their out-of-contract rate — typically the more expensive rates paid when a business or individual doesn’t have one. Contract agreement in place.
“I think the unit rate he quoted was 60p [pence] A unit for gas, which is ridiculous. I imagine a year ago, we were watching 5 or 6p. It’s just complete madness,” Speed said.
“We don’t know what’s going to happen, because we don’t know what’s going to happen. The price is just going ballistic. Nobody’s going to buy.”
Gas prices for both businesses and consumers are only expected to rise during the colder winter months. Speed noted that local cafes that cook on gas will likely struggle, as they have no choice but to continue using it, unless they can replace gas appliances with electric ones.
‘shout at someone too loud’
Rail strikes have already brought the country to a standstill over the summer and look set to continue, while postal workers, telecoms engineers and dock workers have voted to strike as inflation erodes real wages.
Conservative leadership favorite Liz Truss was forced out of London earlier this month into a dramatic U-turn on plans to cut public sector pay, which would see equal wages for teachers, nurses, police and the armed forces.
Local authorities recently offered state school support staff an equal pay rise of £1,925 a year, meaning a 10.5% increase for the lowest paid staff and more than 4% for the highest earners, following pressure from the country’s three biggest unions.
One woman in her early fifties – a member of support staff at a state school in Lincolnshire who asked not to be named due to the sensitive nature of the situation and fear of public retribution – told CNBC that years of real-terms pay cuts have left her with very little. Public sector employees struggling to make ends meet.
In 2010, the British government, following the global financial crisis, announced a two-year pay freeze for public sector workers, followed by a 1% average cap on public sector pay awards which was lifted in 2017, with average pay increases. About 2% by 2020.
While a 10.5% rise would ease pressure on the lowest-paid school support staff, the woman said her energy costs had doubled and her private landlord had tried to raise her rent by £40 a month, which she did not agree to. This means he may need to sell his car to meet basic living expenses.
He called on the government to temporarily reduce “standing charges”, fix a fixed amount that households pay on most gas and electricity bills regardless of how much they actually use, and step up efforts to recover one-off “windfall taxes”. From energy companies such as BP, Shell and Centrica, which are reporting record profits.
“I think it’s a bigger crisis than that [the Covid-19 pandemic]”Because it’s going to affect not only the low earners, but probably the middle earners, because I don’t see how anybody can exploit that kind of energy cost,” she said.
Inflation has fueled further concerns as businesses and governments are pressured to raise wages in the face of rising living costs – but the idea that working families are increasingly being forced to cut back on essentials is far from reality.
“It’s fine ‘we can’t keep 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 live is if their wages go up,” the woman said.
“I know it’s a catch 22, but I really don’t see any way around it – you’ve got to eat.”
In recent months, the situation has begun to take a toll even before the energy crisis worsens as expected.
“I think I’m a very honest, hardworking person. I’ve never committed a crime, always do the right thing, but now I’m starting to feel like you don’t belong in this country,” she said.
“For the first time in my life, I want to go out and do a protest and yell at somebody really loud, and you think ‘What is it going to take?’