BUSINESSES UNDER STRESS FROM HIGH ENERGY PRICES
Updated: Aug 2
Cafes, restaurants and shops were some of the hardest hit by the massive increase to energy bills with many thousands having no real option but to cease trading.
Over the past few years the business sector have found themselves on the receiving end of both the pandemic and then the energy bill hikes. It has certainly been a bleak period for many businesses fighting off the crisis.
The high street is amongst those businesses that have suffered. Not only have their energy prices gone through the roof, but the consumer is reluctant to part company with their hard earned cash as everybody feels the strain of the past few years.
Business owners are constantly looking at ways to save money
In an article in the Independent the senior UK economist at Capital Economics, Ruth Gregory, said: “Never before has real household disposable income declined by 2 per cent in one calendar year, let alone two in a row. That will surely prompt real consumer spending to fall,”
Also in the same article Martin McTague, director of the FSB expressed his concern for the market.
“How is an independent cafe supposed to find another £20,000 a year to keep the lights on and the coffee machine going, when they are barely breaking even as it is?” he said.
“How can a small manufacturer find another £70,000 to keep the production line going and the staff room heated? With five-figure annual energy cost increases common, too many small firms are being faced with impossible choices.”
During this time it was inevitable that many businesses wouldn’t survive this crisis. The Federation of Small Businesses reported that the average rise in energy costs amongst its members has been 424% since early 2021. Since the start of 2020 the massive increase in energy costs has proven to be the final straw for many businesses.
The pressure and stress on many business owners has unfortunately ended in thousands of closures due to unsustainable energy prices over the past few years
An article from May of this year in Red Flag Alert online reported that there were 22,109 insolvencies in 2022, which is the highest number since 2009. The number was driven by Company Voluntary Liquidations (CVLs), which made up 85% of all insolvent businesses in 2022 and represents the largest amount of CVLs since records began in 1960.
It is an understatement to say that the past few years have been disastrous for the business sector. And as the survivors cling on to what they have left they look at ways of saving and the possibility of recouping those losses.
Personal finance company Nerdwallet, recently surveyed 500 UK small business owners to see how they were dealing with the energy bill crisis. Their survey found that
43% who had cut spending in training and development
38% who had put a freeze on hiring
25% who had been forced to let existing staff go
Others in the sector were looking at ways of bringing down those extortionate energy bills. Limiting their opening hours, turning lights off, restrictions on the use of their central heating system. Drastic measures in order to keep their livelihoods intact.
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