How Rising Energy Costs Are Affecting UK SMEs

Share Article
How Rising Energy Costs Are Affecting UK SMEs

From restaurants to laundry services, small businesses are now braced for a national energy crisis, which will see energy costs driven up considerably over the next year. Before Winter 2022, many small businesses will need to renegotiate their energy deals, after a record surge in energy prices. 

Julian Pareira, who owns a laundry company in Birmingham has spoken on the matter: “We fix our energy tariffs for up to five years, and every time we renew a deal it seems to double. This time I won’t be surprised if our energy costs quadruple. It’s madness!”

“These costs can’t be reflected in our charges because if we put up our prices by this much our customers wouldn’t be able to afford it. So, the question I have to ask myself is how we can manage whilst still protecting our customers?”

These concerns are shared with many like-minded small business owners across the UK, who employ over 13 million members of staff and bring in £1.6tn in turnover each year. The Federation of Small Businesses has stated that rising energy costs are now the main concern of its members, which could prove “an existential threat”, particularly for those small businesses which were heavily affected by COVID-19. The FSB is now pushing for the government to provide additional support for small businesses. 

Ibrahim Dogus, who owns several restaurants in central London, says that the hospitality industry is stuck in a “vicious circle” of rising costs and falling revenue. Long-standing restaurants are struggling to find affordable deals on their utility bills. Many suppliers are now refusing to provide contracts without large security deposits, or they charge huge amounts to guard against the risk of the company closing down.

Dogus has already reduced his team, made use of the government’s support schemes, and negotiated payment plans to manage the debt he owes to landlords. However, energy companies are the exception, he says, which could be the difference between whether his chain survives or not,

“Energy companies are not interested in helping at all. If you don’t pay in full for a couple of months someone comes to turn off your lights. Never mind that you can’t pay them if you can’t serve customers. It would be over,” he says.

“It’s a very difficult moment for small businesses. There’s been Brexit, there’s been Covid. But on top of everything else, energy costs could be the breaking point,” he says.

Are you a small business owner? Do you know how much it’s worth? Find out instantly for FREE with our online Valuation Tool.

Timed popup