LONDON — Facing soaring energy bills, rising costs and rapidly declining consumer purchasing power, small businesses across the U.K. are struggling to make ends meet.
We have new data for Wednesday U.K. inflation jumped to a 40-year high of 10.1%In July, food and energy prices continued to rise which further exacerbated the country’s crisis in cost-of living.
The Bank of England expects consumer price inflation to top out at 13.3% in October, with the country’s average energy bills (set via a price cap) expected to rise sharply in the fourth quarter to eventually exceed an annual £4,266 ($5,170) in early 2023.
On Wednesday, a director of U.K. energy regulator Ofgem quitConcerned by the decision to raise household bills hundreds of pound, the watchdog has been accused of failing to find the “right balance” between consumers’ and suppliers’ interests.
In the U.K., real wages dropped by 3% per year in the 2nd quarter of 2022. It was the steepest drop on record as wage rises failed to keep up with an increasing cost of living.
Unpublished Friday survey also shows consumer confidence at its lowest point since records started in 1974.
Alan Thomas, U.K. CEO of insurance company Simply Business, stated, “While the energy price cap does not apply directly to businesses,”.
“Simultaneously consumer purchasing power is falling as Brits reduce non-essential spend, harming SME books [small and medium-sized enterprise] owners.”
This assessment was echoed by Christopher Gammon, e-commerce manager at Lincs Aquatics — a Lincolnshire-based store and warehouse providing aquariums, ponds and marine livestock.
Gammon said that the business’s energy costs have risen by 90% since the conflict in Ukraine started. Gammon also stated to CNBC Thursday that the owners of the company are planning for additional increases over the next few months.
Gammon stated that “We’re fighting rising costs by switching to LEDs, solar panels and wind turbines (planning is underway) and closing all unused systems.”
“We have also had to increase the price of products — most of these have been livestock as they are now costing more to look after.”
Because of the high cost of maintaining fish and reptiles, people are leaving the hobby more often. The store received a Wednesday customer bringing in a snake which they were unable to afford.
Lincs Aquatics had to close its East Yorkshire store due to spiralling costs. They also laid off many workers and offered pay increases at two other locations in Lincolnshire to support them in the financial crisis.
Due to increasing in-store maintenance costs and the rising cost of heating water to maintain marine aquariums, as well as purchasing pumps equipment, the business plans to increase its online store.
A quarterly survey by the British Chambers of Commerce revealed that 82% of British businesses saw inflation growing as a concern. This was despite growth in sales and investment plans, along with a slowing in turnover.
David Bharier (BCC Head of research) stated, “Businesses are faced with an unprecedented convergence in cost pressures.
“The supply chain crisis continues, which has been further exacerbated by conflicts in Ukraine and lockdowns China.
Shevaun Haviland from the BCC stated that all indicators have been declining since March and “the red light on our economic dashboard is starting to blink.”
Phil Speed, an independent distributor at Utility Warehouse, is based near Skegness in England. He works closely with brokers to source energy deals for his business clients.
He told CNBC earlier this week that for the first time in 10 years, he had been unable to obtain a better deal for a client than their out-of-contract rate — the typically expensive rates paid when a business or individual does not have a contracted deal in place.
“I’m assuming that the unit rate she quoted was 60p [pence]A unit of gas is ridiculously high. A year ago we might have seen gas at around 5-6p. Speed stated, “It’s absolute madness.”
“We don’t have any idea of what is going to come our way, and we certainly don’t know when it will happen.” It is going crazy. It’s not going to be bought by anyone.”
As winter approaches, both consumers and businesses will experience an increase in gas costs. Speed stated that the local cafés using gas for cooking will be struggling unless gas appliances are replaced with electric.
“Scream loudly at someone”
Railway strikes brought down the country on several occasions this summer. These are likely to go on. Postal workers, telecom engineers, and dock workers all have voted to strike, as inflation continues its downward spiral.
Conservative leadership favorite Liz TrussThis month, the government was forced to make a drastic U-turn on plans to reduce public sector salaries outside London. The plan would have affected wages for nurses, teachers and the armed force.
Local authorities recently offered state school support staff a flat pay rise of £1,925 per year, meaning a 10.5% increase for the lowest-paid staff and just over 4% for the highest earners, after pressure from three of the country’s largest unions.
One woman in her early fifties – a member of support staff at a state school in Lincolnshire who asked not to be named due to the sensitive situation and concerns on public reprisals – told CNBC that years of real-terms pay cuts had left many low-paid public sector workers struggling to make ends meet.
In 2010, the British government announced a pay freeze in public sectors. This was followed by an average cap of 1% on awards for public sector employees. The average increase in pay rose to about 2% in 2020.
While the 10.5% rise for the lowest-paid school support staff will ease the pressure, the woman said her energy costs had doubled and her private landlord had attempted to increase her rent by £40 per month, which she had not agreed to and which may mean she would need to sell her car to cover basic living expenses.
The government should temporarily lower the “standing cost,” which households pay for most electricity and gas, regardless of how much it actually uses. It also needs to increase its efforts to recover one-off taxes from energy companies like BP, ShellCentrica and Centrica are both reporting record profits.
“I consider this a greater crisis than the one we have in 2008 [the Covid-19 pandemic]She said that this was going to impact not only lower-income earners but also middle earners. “I don’t understand how anyone can absorb these kinds of energy costs.” she added.
The pressure being exerted on businesses and the government to increase wages in the face of skyrocketing living costs has raised further concerns about inflation becoming entrenched – but this consideration is far removed from the reality of working families increasingly being forced to cut back on essentials.
The woman stated that while it is fine to say “we can’t continue putting peoples’ pay up, that would make the cost for living worse”, the reality is that the cost is already out of control and people will only survive if their incomes rise.
“I know it’s a catch 22, but I don’t see a way around that really — you’ve got to eat.”
Even though the expected worsening energy crisis has not yet occurred, it is already starting to affect the situation.
“I believe I am honest, reliable and hardworking. She said that although I have never been convicted of a crime and I have always followed the rules, I feel now like it is proving to be a problem in our country.
“For the first ever time in my entire life, I feel the urge to march out in protest, shout at someone, and then you wonder, “What does it take?”