Is the UK facing a ‘cost of doing business’ crisis?
Mass insolvencies loom as companies face fourfold increases in energy bills
Soaring energy bills are fuelling a “cost of doing business crisis” that may force countless British companies into liquidation, ministers and lobbyists are warning.
Companies are not covered by Ofgem’s energy price cap, instead negotiating bespoke fixed-term contracts with suppliers. And with many of those contracts expiring this year, “the majority of UK companies are due to renegotiate their electricity and gas contracts in October”, the Financial Times (FT) reported.
Paul Wilson, policy director at the Federation of Small Businesses, told the paper that “winter could spell the end for many businesses and they need help now”.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.
Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Fourfold increases
Latest estimates by consultancy Cornwall Insight “show that businesses looking for a new contract this autumn will have to pay more than four times the price they paid for their electricity in 2020”, said the FT.
Calls for urgent action to help mitigate the price hikes pile further pressure on Tory leadership hopefuls Liz Truss and Rishi Sunak to explain their plans to support businesses.
The British Chambers of Commerce has proposed a five-point plan to help its members. The plan includes giving watchdog Ofgem “further powers to strengthen regulation of the energy market for businesses”.
In a letter to the government and the two leadership candidates, the lobby group also called for a temporarily reversal of the planned rise in National Insurance contributions; a temporary cut in VAT to 5%; and expansion of overseas work visas to ease the labour shortage crisis.
British businesses are already struggling to stay afloat. Latest official data shows that 1,800 companies in England and Wales registered for insolvency last month, up by 27% from July 2019, before the pandemic struck.
Chancellor Nadhim Zahawi has reportedly asked Treasury officials to produce recommendations for Boris Johnson’s successor on how the state could help companies. The options are expected to include offering grants to small companies; business rate holidays; temporary exemptions from VAT; and the recrafting of Covid-19 loan schemes.
‘Going to be a bloodbath’
Businesses owners are warning that their companies are “in jeopardy” because of energy price rises, the FT reported.
“I’m more concerned for my business over the next 12 to 18 months than I was during the pandemic,” Gareth Fulford, who runs a restaurant in Cheltenham, told the paper. “It’s going to be a bloodbath unless there’s government help.”
The devastation is expected to hit businesses all over the UK. The latest business confidence monitor for Scotland by the Institute of Chartered Accountants “found sentiment to be in negative territory, with only Wales recording a lower reading”, reported The Scotsman. Scottish firms told the accountancy network that they were struggling to cope with tax, labour market and transport issues, as well regulatory requirements and soaring inflation.
A UK government spokesperson said: “We understand that people are struggling with rising prices, and while we can’t shield everyone from the global challenges we face, we’re supporting British businesses to navigate the months ahead.”
Create an account with the same email registered to your subscription to unlock access.
Sign up for Today's Best Articles in your inbox
A free daily email with the biggest news stories of the day – and the best features from TheWeek.com
Chas Newkey-Burden has been part of The Week Digital team for more than a decade and a journalist for 25 years, starting out on the irreverent football weekly 90 Minutes, before moving to lifestyle magazines Loaded and Attitude. He was a columnist for The Big Issue and landed a world exclusive with David Beckham that became the weekly magazine’s bestselling issue. He now writes regularly for The Guardian, The Telegraph, The Independent, Metro, FourFourTwo and the i new site. He is also the author of a number of non-fiction books.
-
'Good riddance to the televised presidential debate'
Instant Opinion Opinion, comment and editorials of the day
By Harold Maass, The Week US Published
-
Caitlin Clark the No. 1 pick in bullish WNBA Draft
Speed Read As expected, she went to the Indiana Fever
By Peter Weber, The Week US Published
-
Today's political cartoons - April 16, 2024
Cartoons Tuesday's cartoons - sleepyhead, little people, and more
By The Week US Published
-
Controversy is brewing over a lawsuit involving Hermès' luxury bags
Talking Points The lawsuit alleges the company only sells bags to people with a 'sufficient purchase history'
By Justin Klawans, The Week US Published
-
What RFK Jr.'s running mate pick says about his candidacy
Talking Points Robert F. Kennedy Jr.'s' running mate brings money and pro-abortion-rights cred to his longshot presidential bid
By Harold Maass, The Week US Published
-
Chinese electric cars may be coming to spy on you
Talking Points The Biden administration investigates Chinese electric cars as a potential economic and national security threat
By Harold Maass, The Week US Published
-
Is this the end of the big night out?
Talking Point Bar closures and Gen Z teetotallers threaten 'extinction' for 'messy nights on the town'
By Chas Newkey-Burden, The Week UK Published
-
Did the Biden impeachment inquiry just collapse?
Talking Points Key GOP impeachment inquiry witness Alexander Smirnov says Russian intelligence fed him lies
By Harold Maass, The Week US Published
-
New austerity: can public services take any more cuts?
Today's Big Question Some government departments already 'in last chance saloon', say unions, as Conservative tax-cutting plans 'hang in the balance'
By The Week UK Published
-
Japan is no longer the world's third-biggest economy despite its stock market peaking
Talking Point The country was overtaken by Germany after unexpectedly entering a recession
By Justin Klawans, The Week US Published
-
What Elon Musk has to fear from China's 'Tesla killer'
Talking Points BYD is now the world's biggest seller of electric vehicles
By Joel Mathis, The Week US Published