According to an Entrepreneurng report, due to being locked into long-term contracts that were set when prices reached a historical high last year, more than 1 million small companies may be paying energy bills that are much higher than market rates.
Trade organizations from the metalworking industry to convenience stores have banded together to issue a “perilous situation” warning.
To avoid thousands of insolvencies that would harm jobs and the UK economy, they are urging ministers to compel suppliers to renegotiate overpriced energy arrangements made last summer.
According to separate surveys from the British Chamber of Commerce (BCC) and the Federation of Small Businesses (FSB), over 1 million of the 5.5 million small businesses in the UK may have been forced to renew their long-term energy supply contracts at the peak of the market, including through coercion or misspelling.
Many small businesses at the time had trouble finding an energy arrangement since suppliers either wouldn’t work with them or required big financial deposits.
Since that time, market prices have declined, and the government terminated its financial support for business on April 1. However, businesses are still bound by long-term contracts that will require them to continue paying inflated prices based on the high of last year for months or even years to come.
As energy suppliers and brokers generate “huge profits at the expense of UK competitiveness,” CBM President Stephen Morley warned that small manufacturers are in a “perilous situation” that might “put another nail in the coffin of the British manufacturing sector.”
After admitting that it was “very concerned” about how some energy brokers and suppliers were acting toward business energy clients, the energy regulator, Ofgem, issued the warning a few weeks later.
In a letter sent to the chancellor of the exchequer last month, Ofgem said that businesses were being hit with energy bills that were “higher than is explained by market conditions” and that they frequently had to pay standing charges and deposits that were significantly higher.
Since the government terminated its initial support program at the end of March, after just six months, several small manufacturers in the West Midlands have already filed for bankruptcy, according to Morley.
When energy prices were at their highest towards the end of last summer, it was estimated that almost a fifth of small businesses in the UK signed new energy contracts. About 60% of respondents reported having trouble making ends meet after March 2023.
Many people were forced to pay high fees since the government pushed them to sign up for fixed-price agreements rather than tracker contracts.
Conclusion
According to a second FSB survey, 320,000 small firms may have trouble paying their payments, and 24% of them are on fixed deals. The FSB’s policy head, Tina McKenzie, stated that companies should be given “a fighting chance” by being permitted to “blend and extend” their current energy rates with rates that reflect reduced market pricing.
Source: The Guardian
