Over 1 million UK businesses may be paying above market rate for their energy bills, symptomatic of the surge in gas and electricity prices across 2022 forcing SMEs into high cost energy tariffs.
According to the Guardian, a vast number of small businesses took on long-term contracts that were fixed at historically high levels, when energy costs peaked last year.
Surveys from the Federation of Small Businesses (FSB) and the British Chamber of Commerce (BCC) estimate that approximately a quarter of the UK’s 5.5 million small businesses would have had to renew their contracts at the top of the market.
Worryingly, it has been suggested that a significant proportion of contract renewals came about through mis-selling or coercion.
Trade groups across the UK have been campaigning vociferously for ministers to put pressure on energy suppliers, in order for them to renegotiate unaffordable contracts with their customers.
Notably, in a letter from the Confederation of British Metalformers (CBM) to the Business Secretary, Grant Shapps, the current state of affairs has been dubbed as “biggest mis-selling scandal since PPI”.
As it stands, thousands of small businesses are at risk of insolvency, further damaging the ailing British economy and jobs across the UK.
Small Business Energy Costs in 2023
Energy costs have decreased since peaking last year, however, high cost energy tariffs risk annihilating the already depleting profit margins of SMEs.
Recently, the energy regulator, Ofgem, declared that they were gravely concerned with the behaviour of some energy suppliers and brokers, who have been accused of unscrupulous conduct.
With the government’s energy support ending for swathes of businesses across the UK last month, organisations in specific sectors will be moving into Spring, uncertain if they’ll still be solvent by the end of the year.
Particularly, small manufacturers will be badly affected by these fixed tariffs, due to the energy intensive nature of their operations.
However, concern spans across an array of industries, with few unaffected by the exploitative energy costs that have banked many of the suppliers record profits.
Chris Noice, a spokesman for the Association of Convenience Stores, said: “Thousands of our members are dealing with the short-term pain of fixed contracts that were signed in the second half of 2022, at the height of wholesale prices”.
Noice called on ministers to “help them off these huge fixed contracts as soon as possible and on to something that better reflects the current wholesale market”.
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