Energy bills are squeezing businesses and people as UK costs soar

A high street decorated with the Jack flag of the British Association in Penistone, UK. The Fuel Poverty Alliance Finally warned “a tsunami of fuel poverty will hit the country this winter.”

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LONDON – Faced with soaring 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 shown UK inflation rises to 40-year high of 10.1 percent in July as food and energy costs continue to soar, exacerbating the country’s cost of living crisis.

The Bank of England Consumer price inflation is expected to hit 13.3% in October, with the country’s average energy bill (established via price cap) expected to rise sharply in Q4 to eventually exceed £4,266 ($5,170) annually by early 2023.

On Wednesday, a The head of UK energy regulator Ofgem has quit over the 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 3% annually in the second quarter of 2022, the steepest decline on record, as wage growth failed to keep pace with rising costs of living.

A new survey released on Friday also showed consumer confidence fell to its lowest level since records began in 1974.

‘Absolute madness’

Alan Thomas, CEO of UK insurer Simply Business, said: “While the energy price cap does not apply directly to businesses, millions of small business owners are still faced with the increasing energy bills at a time when costs are rising in most areas of activity.”

“At the same time, consumer purchasing power is going down as Britons cut non-essential spending, hurting the books of small and medium-sized businesses. [small and medium-sized enterprise] owners.”

This review is echoed by Christopher Gammon, e-commerce manager at Lincs Aquatics – a store and warehouse based in Lincolnshire that offers aquariums, ponds and marine pets.

So far, the business has seen energy costs rise 90% since the war in Ukraine began, Gammon told CNBC on Thursday, and its owners are making provisions for further increases in the future. coming months.

“We are combating rising costs by switching everything to LEDs, solar panels, wind turbines (planning) and shutting down unused systems,” said Gammon.

“We’ve also had to increase the price of the products – most of these are pets because they’re costing more to care for.”

Customers are increasingly withdrawing from keeping fish and reptiles due to maintenance costs, and on Wednesday the store had a customer bring in a snake they could no longer afford to care for.

Rising costs forced Lincs Aquatics to close one store in East Yorkshire, lay off some workers, and try to raise wages for staff at its two remaining locations in Lincolnshire to help them weather the crisis.

The business is also working to expand its online store due to rising in-store maintenance costs, as hot water for marine aquariums and pump equipment become more and more expensive.

At the beginning of July, a quarterly survey from the British Chambers of Commerce found that 82% of businesses in the UK see inflation as a growing concern for their business, given the growth in sales. , investment intentions and long-term revenue confidence both slowed.

BCC head of research David Bharier said: “Businesses face an unprecedented convergence of cost pressures, with key drivers coming from raw materials, fuel, utilities, taxes and labor. motion.

“The continuing supply chain crisis, exacerbated by the conflict in Ukraine and the shutdowns in China, has added to this.”

BCC general manager Shevaun Haviland added that “the red light on our economic dashboard is starting to flash”, with almost every indicator deteriorating since the March survey.

Phil Speed, independent distributor for multi-services company Utility Warehouse, based in Skegness, UK, contacts brokers to find energy deals for corporate clients.

He told CNBC earlier this week that for the first time in 10 years, he hasn’t been able to get a better deal for a client than their out-of-contract price – the often expensive price paid when a businesses or individuals without contractual agreements in place.

“I think the unit price she is quoting is 60p [pence] a unit for gas, which is ridiculous. I imagine a year ago we were looking at 5 or 6p. It’s just sheer madness,” Speed ​​said.

“We don’t know what’s going to be presented to us, because we don’t know what’s going to happen. The price is just going up ballistic. Nobody’s buying it.”

Gas costs for both businesses and consumers are expected to increase during the colder winter months. Speed ​​notes that local cafes that cook with gas will likely struggle, as they have no choice but to continue using it, unless they can replace the gas appliances. by electricity.

‘Scream loudly at someone’

Rail strikes that have shut down the country for several days during the summer are likely to continue, while postal workers, telecommunications engineers and dock workers all voted to suspend because inflation erodes real wages.

Conservative leader favorite Liz Truss Earlier this month, it was forced to overturn plans to cut wages for the public sector outside London, which would have cut salaries for teachers, nurses, police and the armed forces.

The local government recently proposed a flat pay increase for school support staff of £1,925 a year, meaning an increase of 10.5% for the lowest-paid staff and just over 4% for the lowest-paid staff. highest earners, after pressure from three of the country’s largest unions.

A woman in her fifties — a member of support staff at a public school in Lincolnshire, who requested anonymity due to the sensitive situation and concerns about public reprisals — told CNBC that many Years of real-world wage cuts have left many low-paid public sector workers struggling to make ends meet.

The UK government in 2010, as a result of the global financial crisis, announced a two-year wage freeze for public sector workers, followed by a 1% average cap on Public sector wage bonuses were lifted in 2017, with average wage increases increasing. about 2% by 2020.

While a 10.5% increase for the lowest-paid school support workers should ease the pressure, the woman said her energy costs have doubled and her private landlord has trying to increase her rent by £40 a month, which she disagrees with and could mean she will need to sell her car to cover basic living expenses.

She called on the government to temporarily reduce the “permanent fee”, a fixed daily amount that households pay for most gas and electricity bills regardless of how much they actually use, and to make an effort. One-time collection of “taxes” from energy companies such as BP, Cover and Centrica, are reporting record profits..

“I think this is an even bigger crisis [the Covid-19 pandemic]because this will not only affect low-income people, it could affect middle-income people, because I don’t see anyone who can absorb those kinds of energy costs, ” she said.

Wage pressure on businesses and governments amid soaring costs of living has added to concerns that inflation is becoming entrenched – but this consideration is far from the fact that the Working families are increasingly forced to cut back on essential needs.

“It’s okay to say ‘we can’t keep raising people’s wages, that will make the cost of living worse’, but the cost of living is out of control and the only way out for people to survive is if their wages go up,” the woman said.

“I know it’s a catch 22, but I really don’t see a way around that – you have to eat.”

The situation in recent months, even before the energy crisis was predicted to worsen, has begun to show signs of seriousness.

“I just think I’m a very honest, hard-working person. I’ve never committed a crime, always done everything right, but now I’m starting to feel like you’re nowhere in this country.” , she said.

“For the first time in my life, I want to go out on a march to protest and shout at someone, and you just think ‘what does it need?'”

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