Business leaders fear thousands of British firms will go bust after the government revealed plans to cut its energy support package from April.
(Bloomberg) — Business leaders fear thousands of British firms will go bust after the government revealed plans to cut its energy support package from April.
The new program for businesses will cost as much as £5.5 billion ($6.7 billion) for a year, sharply down on the £18 billion spent in the last six months, Treasury Minister James Cartlidge said Monday.
The much-reduced package risks leaving small companies “at the mercy of Putin,” according to Martin McTague, the Federation of Small Businesses’ national chair, referring to high wholesale costs stemming from Russia’s invasion of Ukraine.
“It’s a massive disappointment,” McTague told the BBC on Tuesday morning. “It seems absolutely crazy now to abandon so many firms when they’ve spent so much money getting them through the winter.”
He said one in four small firms will have trouble surviving if they are hit with a large increase in energy costs and many are already considering whether to fold. Small businesses employ 16 million people so a wave of collapses “could have massive implications for the UK economy,” he argued.
Asked on LBC radio if some companies will go bust as a consequence of the government’s new plan, Business Secretary Grant Shapps said: “I very much hope that isn’t the case”
The £10 Pint
Tayub Amjad, co-founder of the Zouk Tea Bar in the northern city of Manchester said he expects his energy bills to jump by £150,000. The revised taxpayer support “will not scratch the surface,” he told the Today program.
If pubs passed all their rising costs on to consumers, the price of a pint of beer would soar to £10, added Charlene Lyons, chief executive officer of Black Sheep Brewery. She said pubs will have to cut their opening hours in an attempt to reduce costs.
For the Light Cinema chain, which runs 12 theaters across the UK, the jump in the cost of energy over the past 12 months has sent its bill from £1 million to £3 million each year. “For a business our size, that can take a company from profitability to non-profitably,” said Keith Pullinger, the company’s founder and deputy chairman.
The cost of living crisis means that Pullinger is unable to pass all of this cost onto consumers, who are also feeling the pinch. The Light’s contract ran out in October, meaning it is exposed to the fluctuating market rate for energy. Pullinger has sought to save costs by opening later. “We’re just trying to think about energy, and what time you turn everything on in the building,” he said.
Car Industry
Manufacturers are particularly vulnerable to the change. Qualplast Ltd. is part of the automotive supply chain, whose clients include car manufacturing brands such as Rolls-Royce, Jaguar Land Rover and Bentley.
David Caro has run Qualplast in Birmingham for 46 years, but the past few months have been the toughest yet. Over 12 months his energy bill has increased by 454%, reaching £10,000 a month. Caro, 72, said he teeters between breaking even and falling into a loss. “It’s winter, so we have the heating on, and we have three ovens working, so we are using a lot of energy,” Caro said.
–With assistance from Rachel Morison and Joe Mayes.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.