Large energy companies are refusing to supply small businesses for fear they may go bankrupt, with some demanding £10,000 up front, business owners and industry experts said. experts tell the Guardian.
In the latest sign of the deepening energy crisis, business owners are struggling to find suppliers for the busy October period to renew their gas and electricity contracts, resulting in “outrageous” bills. and demand for deposits.
Suppliers alleged to have refused service or requested a down payment include SSE, Scottish Power, E.On Next, Drax and Ecotricity.
Business owners called on the government for urgent action and warned that sectors such as hospitality, already struggling with inflation and the lingering effects of the Covid-19 pandemic, were particularly at risk.
Teresa Hodgson, owner of The Green Man pub in Denham, near Uxbridge, was initially told by her supplier, SSE, that she could not provide an energy estimate due to rapidly rising prices. “When I tracked them down, they said they wanted a deposit of £10,000 before they could proceed,” Hodgson said.
“When I asked why, they never had a problem with me and they said, ‘I don’t think many pubs will do well this year, so we need security.’ I’ve had other suppliers who don’t enjoy it at all because it’s hospitality,” she added.
Unlike homes, businesses typically purchase energy on contracts that last for several years. It is often done through specialized brokers who connect with suppliers for quotes. If no fixed-rate contract is found, move to a non-contractual “deemed” rate. This rate has no upper limit and can skyrocket in line with market prices.
Mark Dickinson, chief executive of energy consultancy Inspired, said some energy companies are opting only to renew contracts with existing customers, “so they are exiting new business. . [Others are] You are effectively saying that you do not want to renew your current customer. ”
He said this was partly due to price volatility on the wholesale energy market caused by the war in Ukraine. In some cases it doubled.
Energy companies are also reluctant to insure pressure-bearing sectors such as pubs and are struggling to persuade credit insurers to cover them if their customers go bankrupt. Instead, suppliers manage risk by requiring upfront security deposit payments, even from existing customers.
The British Beer and Pub Association (BBPA) said one of its members was recently turned down by five suppliers. This is a trend that threatens the existence of pubs. “At present many energy suppliers refuse to offer contracts to pubs, so the lack of competition in the market forces them to sign exorbitant contracts or maintain punitive out-of-contract rates. They’re even more at risk because they’re being forced to do things for themselves,” said Emma McLarkin, BBPA’s chief executive officer.
she said: “The market is not giving hope to the hospitality sector. Energy prices must be capped before this crisis forces pubs and other businesses across the country to close.”
Gemma Holt, owner of Lily’s Beauty Salon in Whitchurch, Shropshire, said she found it almost impossible to renew her energy contract. “We thought we had found a new energy supplier, but the first one we tried couldn’t take us on because we were in the hair and beauty business, and we were in the laundry business. Because the machines and tumble dryers were running all the time, they were using energy.”
William Robinson, landlord of pub tenants whose business has more than 200 Robinsons Brewery calls for urgent action. “If the government doesn’t address this, the ramifications could be huge,” he said. “It doesn’t help us when they take summer vacation. The important thing is that it happens quickly.
A spokesman for the Department for Business, Energy and Industrial Strategy (BEIS) said the government cannot control energy prices but will provide £4.6bn worth of support over five years, including support for energy-intensive businesses. said he did.
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SSE said it would require deposits on a “case-by-case” basis to mitigate risk and that the amount would be repaid at the end of the contract.
A spokesperson for E.ON said: ”
A ScottishPower spokesperson said:
Both Scottish Power and Ecotricity say businesses must pass a credit check.
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