A high street adorned with British Union Jack bunting in Penistone, 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 – With energy bills soaring, costs rising and consumer spending power rapidly declining, small businesses across the UK are struggling to make ends meet.
New data on Wednesday showed that UK inflation rose to a 40-year high of 10.1% in July as food and energy costs continued to rise and exacerbated the country’s cost-of-living crisis.
The Bank of England expects consumer price inflation to peak at 13.3% in October, with the country’s average energy bill (set via a price cap) expected to rise sharply in the fourth quarter, eventually to start the year at £4,266 ($5,170) to exceed 2023.
On Wednesday, a director at Britain’s energy regulator Ofgem resigned over its decision to hike household bills by hundreds of pounds, accusing the regulator of failing to strike the “right balance between the interests of consumers and the interests of suppliers”.
Real wages in the UK fell by 3% annually in the second quarter of 2022, the sharpest fall on record, as wage increases failed to keep pace with the rising cost of living.
A new survey released on Friday also showed that consumer confidence has fallen to its lowest level since records began in 1974.
“Absolute madness”
“While energy price caps do not apply directly to businesses, millions of small business owners are still facing increased energy bills as costs rise in most areas of operations,” said Alan Thomas, UK CEO of insurance company Simply Business.
“At the same time, consumers’ purchasing power is falling as Brits cut non-essential spending, hurting SME books [small and medium-sized enterprise] Owner.”
That assessment was echoed by Christopher Gammon, e-commerce manager at Lincs Aquatics – a Lincolnshire-based shop and warehouse offering aquariums, ponds and marine life.
The company’s energy costs are up 90% so far since the start of the war in Ukraine, Gammon told CNBC on Thursday, and its owners are bracing for more hikes in the coming months.
“We’re fighting rising costs by converting everything to LED, solar panels, wind turbines (planned) and shutting down idle systems,” Gammon said.
“We also had to raise the prices of products – most of which were farm animals, as they now cost more to care for.”
Customers are increasingly withdrawing from keeping fish and reptiles due to maintenance costs, and on Wednesday a customer brought in a snake he could no longer afford.
Soaring costs forced Lincs Aquatics to close a store in East Yorkshire and lay off several employees while trying to offer raises to employees at the two remaining Lincolnshire sites to help them through the crisis.
The company is also working to expand its online store as in-store running costs are increasing as heating water for saltwater aquariums and purchasing pump supplies become more expensive.
In early July, a quarterly survey by the British Chambers of Commerce found that 82% of UK businesses see inflation as a growing concern for their business, with slowing sales growth, investment intentions and longer-term sales confidence.
“Companies are facing unprecedented cost pressures, with the key drivers being commodities, fuel, utilities, taxes and labor,” said David Bharier, Head of Research at BCC.
“The ongoing supply chain crisis, exacerbated by the conflict in Ukraine and lockdowns in China, has exacerbated this further.”
BCC Director-General Shevaun Haviland added that “the red lights are starting to flash on our economic dashboard” with almost all indicators deteriorating since the March survey.
Phil Speed, an independent distributor for multi-service company Utility Warehouse based in Skegness, England, works with brokers to find energy deals for commercial customers.
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 his out-of-contract rate — the normally expensive rates paid when a company or a Individual has not signed a contract.
“I think the unit price she quoted was 60p [pence] a unit for gas, which is just ridiculous. I would imagine a year ago we would have seen 5 or 6p. It’s just absolutely amazing,” said Speed.
“We have no idea what is being presented to us because we have no idea what is going to happen. The price becomes downright ballistic. Nobody will buy it.”
Gas costs for businesses and consumers are only expected to increase during the colder winter months. Speed noted that unless they can replace gas appliances with electric ones, local cafes that cook with gas are likely to struggle as they have no choice but to continue using it.
“Yelling at someone very loudly”
Rail strikes have brought the country to a standstill for several days throughout the summer and are expected to continue, while postal workers, telecom engineers and dockers have all voted to strike as inflation erodes real wages.
Conservative leader favorite Liz Truss was forced into a dramatic about-face earlier this month on a plan to cut public sector pay outside London, which would have cut wages for teachers, nurses, police officers and the armed forces alike.
Following pressure from three of the country’s largest unions, local authorities recently offered state school staff a lump sum pay rise of £1,925 a year, an increase of 10.5% for the lowest paid staff and just over 4% for the highest paid employee corresponds.
A woman in her early 50s – a student assistant at a Lincolnshire state school who asked not to be named due to the sensitive situation and concerns about public reprisals – told CNBC that years of real pay cuts had caused many paid public sector workers to retire ministry struggling to survive.
The UK government announced a two-year pay freeze for public sector workers in 2010 in the wake of the global financial crisis, followed by a 1% average cap on public sector pay, which was lifted in 2017, with average pay increases increasing to around 2% by 2020 .
While the 10.5% increase will ease the pressure on the school’s lowest-paid support staff, the woman said her energy bills have doubled and her private landlord has tried to increase her rent by £40 a month, which she has failed to do agreed and what may mean she would have to sell her car to cover basic living expenses.
She called on the government to temporarily lower the “base fee,” a fixed daily amount that households must pay for most gas and electricity bills regardless of how much they actually use, and to step up efforts to eliminate one-off “windfall taxes” to recoup. by energy companies like BP, Shell and Centrica reporting record profits.
“I think this is an even bigger crisis than [the Covid-19 pandemic]because this will not only affect low earners but maybe even middle earners because I don’t see how anyone can absorb these kinds of energy costs,” she said.
Pressure on businesses and the government to raise wages amid soaring living costs has raised further concerns about entrenching inflation – but that consideration is a far cry from the reality that working families are increasingly being forced to buy basic necessities to shorten.
“It’s okay to say, ‘We can’t raise people’s wages any more, that’s going to make the cost of living worse’, but the cost of living is already out of control and the only way for people to survive is if their wages rise,” said the woman.
“I know it’s a catch 22, but I don’t see a way around it really — you have to eat.”
The situation of the last few months, even before the expected intensification of the energy crisis, has already started to take its toll.
“I just think I’m a very honest, hardworking person. I’ve never committed a crime, always done things right, but now I feel like that’s not going to get you anywhere in this country,” she said.
“For the first time in my life I want to go out and march in protest and yell at someone really loud and you’re like, ‘What does it take to do that?'”