Why are they paying so much?
It has emerged that thousands of small and medium sized businesses are paying unnecessarily high energy prices because they signed up to tariffs while they were at the peak of the market.
Emergency research conducted the British Chambers of Commerce (BCC) and the Federation of Small Businesses (FSB) have both concluded that up to a quarter of the UK’s small businesses – over one million companies – are locked into significantly higher fixed price energy tariffs than they usually would be with further allegations of coercion and mis-selling.
We’ve previously written about the new business energy support rolled out by the government at the start of the month that is less generous than the previous scheme but the research shows that many companies are now locked into long-term contracts based on the historic peak of last year’s prices that will mean they are paying higher prices for months and possibly years into the future.
The representatives of one heavily energy dependent sector, metal manufacturers, have written to the Business Secretary Grant Shapps describing the situation as “the biggest mis-selling scandal since PPI”.
Stephen Morley, president of the Confederation of British Metalformers (CBM) said that his members and other small manufacturers faced “a perilous situation that could put another nail in the coffin of the British manufacturing sector while energy suppliers and brokers make huge profits at the expense of UK competitiveness.”
There may be some movement eventually as Ofgem have already said that they are very concerned about the behaviour of some energy brokers and suppliers in relation to how they deal with business customers.
In a letter sent to the Chancellor ahead of the budget last month, Ofgem said companies faced energy bills “that are higher than is explained by market conditions” and in many cases had been forced to pay much higher deposits and standing charges.
60% of respondents to the BCC survey said they would face difficulties paying their energy bills this year with many claiming the government encouraged them to sign up to fixed price deals rather than tracker arrangements.
A similar but separate survey from the FSB found that 24% of small businesses were on fixed deals and at least 320,000 said they would have trouble keeping up with bills.
Chris Horner, insolvency director with BusinessRescueExpert, said: “Even with the Energy Bills Discount Scheme (EBDS) coming into operation at the beginning of the month, for many of the thousands of small businesses caught in expensive fixed price energy contracts, it’s a sticking plaster at best.
“As we’re seeing with inflation and day to day supermarket prices, there is no guarantee that just because the wholesale energy price reduces that it will immediately be applied to the cost of energy for businesses – especially those on fixed price deals.
“We don’t know if there will be any additional action for government, but what we do know is that there are solutions available to directors that believe they will have a hard time keeping up with their bills for the rest of 2023 and beyond.
“Energy bills, along with bounce back loans and other forms of unsecured debt would be included in any creditors voluntary liquidation (CVL) process that would see them written off when the business is closed.
“But there are other tools available for otherwise viable businesses to help navigate high energy costs that could help them through these tricky times too.”
Now the scale of companies struggling with their energy bills is becoming clearer. So will the number of directors who will acknowledge that they need some help just to literally keep the lights on.
This is why we offer a free initial consultation to anybody that wants to explore what options they have and how they can apply them to bring about some positive changes in a tough trading environment.
All they have to do is get in touch to arrange a convenient time to talk and our expert advisors will help them explore what’s possible in the short and medium terms that could make the crucial difference.