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UK faces 'cost of doing business' crisis as energy bills quadruple

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UK businesses face “costs of doing business crises”, ministers have warned, with many commercial energy prices likely to more than quadruple this fall.

Most UK businesses will renegotiate their electricity and gas tariffs in October, the month in which fixed prices have been set for businesses since the energy market was privatized. A number of companies have contracts that expire this year, according to energy brokers.

Businesses looking for new contracts this fall will have to pay more than four times what they paid for electricity in 2020, according to new estimates from consultancy Cornwall Insight.

Small Business Federation policy director Paul Wilson said the government needed to step in to prevent thousands of businesses from hitting a wall.

“We can’t afford to wait any longer… Winter could spell the end for many businesses and they need help now,” he said. “If we don’t address the costs of dealing with the business crisis, the costs will continue to be passed on to hard-hit consumers, or worse, people will lose their jobs.”

UK wholesale energy costs jumped by a fifth in the last month alone

The British Chamber of Commerce issued its own warning in a letter to the government and two Conservative candidates in the race to become prime minister.

The lobby group has proposed a five-point plan to help members, including giving Ofgem, the energy regulator, power over the corporate market. They also want to cancel plans to raise national insurance premiums, temporarily reduce VAT to 5%, and expand overseas work visas to ease the labor shortage crisis.

“In June, we budgeted the government until the fall budget, but the latest economic forecasts since then have been worse than expected,” said BCC Executive Director Shevan Havilland.

The FSB also wants Ofgem to intervene, calling for capping energy prices for small businesses with 10 or fewer employees, similar to households.

Households are betting that Ofgem will double the cap on retail energy prices from October to an estimated £3,600. Without corporate price caps, companies are more likely to be exposed to a sharp rise in the wholesale energy market.

Cornwall Insight has calculated that businesses will have to pay £634 per MWh for electricity this fall. That’s more than four times his price in 2020 and more than double his price last year.

Unlike domestic bills, electricity typically accounts for a much larger share of small business energy costs than gas, according to the FSB. The industry group expects a typical London business with an annual consumption of 30MWh to see its annual electricity bill jump from just over £4,700 to more than £21,200 since last February. His petrol bill jumped from £1,350 to just under £7,050, more than quintupling over the same period.

Mr Haviland said the BCC plan is “to protect jobs, secure livelihoods and create a vibrant and prosperous society for all”.

About 1,800 companies in England and Wales filed for bankruptcy in July, a 27% increase from the same month in 2019 before the pandemic hit, according to the latest official data.

UK company bankruptcies from 2019 to 2022

Gareth Fulford, who runs a restaurant employing eight staff in Cheltenham, said his business was “in jeopardy” due to rising energy prices. Energy costs have already made late-day mid-week trading impractical, he said.

“I’m more worried about my business over the next 12 to 18 months than I was during the pandemic. Without government support, it’s going to be a disaster,” Fulford said.

The government has so far only supported households with a £15 billion package announced in May. But the minister has been warned by energy suppliers that he will need more help as wholesale prices continue to rise.

Liz Truss, the front-runner to become prime minister when the Conservative leadership election ends Sept. 5, initially offers a “handout” to help people deal with the cost of living crisis. He expressed his reluctance to do so.

But over the weekend, she acknowledged the difficulties facing companies and said she would offer help “all the way”. says it will “consider all options,” and small businesses are likely to receive the most generous support.

The current prime minister, Nadhim Zahawi, has urged officials to compile a list of options for the next prime minister and prime minister to help businesses facing a surge in bills.

Officials recommend options such as subsidies for small businesses, corporate rate holidays, temporary exemptions from VAT and restructuring of Covid-19 loan schemes to help businesses cope with energy prices It is expected that

A government spokesperson said: “We understand that people are struggling with rising prices. We’re helping you get through the moon.”

This article has been amended to reflect the FSB example of a typical London company’s annual consumption of 30MWh instead of 30kWh.

Heading into a global recession? Economics editor Chris Giles and US economics editor Colby Smith discussed this and how different countries might react in his latest IG live.look here.

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