West Midlands firms facing energy costs nightmare

Stephen Morley, the president of the West Bromwich-based Confederation of British Metalforming says the manufacturing businesses he represents face an average of 400 to 600 per cent higher bills when they renew their contracts.

One company which previously paid 1.3p per kilowatt hour for electricity was told the new charge would be 16 per kWh hour, before the quote was increased to 23p/kWh just six days later.

"I've not spoken to one member who can afford these increases, I can see more businesses going out of business paying this, than from the pandemic," said Mr Morley.

"Most members don't get any help at all. They're not classed as high-intensity users," he explained.

For 12 months the confederation has been encouraging members to invest in solar panels, offering them relief from energy price increases, but the economic climate combined with pandemic aftershocks make it very challenging for them to do so.

"If they're serious about renewables... without a doubt, the Government should support this with grants," Mr Morley says.

Graham Oakley of Cannock-based Clear Three, which works with businesses and supply chains to reduce waste and pollution and save water, says one of his clients faced an energy bill increase from £18,000 to £100,000 a month.

Even after successfully challenging this, their bills rose to more than twice their previous level.

Mr Oakley warns of a wave of bankruptcies in hospitality, dependent on energy-intensive laundry services.

The motor industry is also struggling to cope with the alarming rate of rise in energy costs.

Jaguar Land Rover, which has its engine manufacturing centre at Wolverhampton, uses a huge amount of energy in its production line.

A spokesman for the company said today: "We have cost optimisation plans in action to mitigate these challenges as much as possible and will look to limit the impact for customers wherever we can."

The Confederation of British Industry says there is no time to lose before taking decisive action to help companies with the energy crisis.

Nearly one in three businesses surveyed by the organisation said soaring gas prices are likely to stifle their investment in transitioning to net zero.

Also 69 per cent of firms said they expect energy bills to rise in the next three months, and nearly a third expect rises of more than 30 per cent.

The CBI wants the Government to target support at companies most in need.

It is also calling for a massive energy efficiency drive to give people upfront financial support for improving their home insulation. It also wants energy-intensive businesses to be given support to improve their efficiency.

Matthew Fell, CBI chief policy director, said: "While helping struggling consumers remains the number one priority, we can't afford to lose sight of the fact that many viable businesses are under pressure and could easily tip into distress without action.

"The guiding principles for any intervention must be to act at speed, and to target help at those households and firms that need it most.

"Firms aren't asking for a handout. But they do need autumn to be the moment that Government grips the energy cost crisis. Decisive action now will give firms headroom on cashflow and prevent a short-term crunch becoming a longer-term crisis.

"With firms under pressure not to pass on rising costs, there is a risk that vital business investment is paused or halted entirely. That in turn could pose a real threat to the UK's economic recovery and Net Zero transition."

The British Chambers of Commerce has written to the Prime Minister, Chancellor of the Exchequer and both leadership candidates for the Conservative Party, proposing a plan to provide vital support to UK businesses.

It includes Ofgem being given more power to strengthen regulation of the energy market for businesses; a temporary cut in VAT to five per cent to reduce energy costs for businesses and introducing Government emergency energy grants for small and medium-sized firms.

Director General of the BCC, Shevaun Haviland, said: “At over 10 per cent, CPI inflation is at a 40-year high; interest rates are seeing the largest increase in 27 years; and eye-watering energy bills have created a perfect storm of increasing costs. The impact of these challenges on consumers, businesses and wider society cannot be overstated. "

Dave Atkinson, regional director for the Midlands at Lloyds Bank, said: “The cost of ‘doing business’ is hitting many businesses hard, and energy bills are a huge part of this. But there are some key steps SMEs can take to alleviate the pressure. Recent research by the think tank Green Alliance revealed that, just in Birmingham, Bristol, Leeds, London and Manchester, office buildings are shedding more than £60 million every year on unnecessary energy use, meaning there are big savings to be made.

“The most important thing to remember is that what you don’t measure, you can’t manage – keeping costs under close review means you can keep track of whether changes you implement are having an effect. And even small tweaks can have a big impact. It may sound obvious, but encouraging teams to turn off lights and computers, and dropping the thermostat by even a single degree can save significant amounts of power.

“Also, with the pandemic prompting many businesses to reconsider their office space requirements, it’s worth considering a shared or serviced option, or if teams have adopted a hybrid model, whether it is possible to agree temporarily over the winter months to days when everyone works from home and when everyone comes into the office, rather than having only a few people in the office each day across the week. This can help to reduce a number of costs, including energy bills.

“Finally, investing in sustainability can pay dividends over the long term. Switching just one traditional halogen bulb to an LED can save around £2 to £3 every year – so there is potential for huge cost reductions by making the switch throughout an office space."

British Beer and Pub Association chief executive Emma McClarkin has called for an energy cap for businesses and has warned that the extreme rise in energy costs could do more damage to the industry than the pandemic if nothing was done in the next few weeks.

"There are pubs that weathered the storm of the past two years that now face closure because of rocketing energy bills for both themselves and their customers.

"If we lose them, we not only lose businesses and the jobs that go with them, but also the beating heart of communities," she said.

The Federation of Small Business predicts that 53 per cent of SMEs will either stagnate, decline or fold in the next year and the British Independent Retailers Association (Bira) has revealed that almost 88 per cent of its members feel they are being forced into raising their prices to shoppers once the energy price jump comes into effect this autumn.

In a recent survey it found that business owners are preparing for the worst. Among those questioned, 65 per cent said they would be forced to reduce the number of staff they had or reduce wages, while 40 per cent were considering limiting opening hours and almost 23 per cent would be looking to permanently or temporarily close the business.

Andrew Goodacre, Bira’s chef executive said: “Businesses are under great pressure at the moment and with some concerned that they need to reduce hours or even close permanently is incredibly worrying for us and the local economy.

“There has been no specific help coming through from central or local authorities to help businesses who are struggling with their bills which has been very disappointing. While some areas may have hardship funds or slight reductions in business rates, this is not seen across the country. It is clear to us that businesses are being targeted by energy providers to make up for any restricted price caps on consumers,” he said.

Mr Goodacre added that while business rate relief would be welcome, small businesses would still be paying 100 per cent more this year compared to last year.

"We asked the Government not to do this because as long ago as last October we were seeing huge increases in retailer energy bills. More recently it has been 500 per cent, and keeping rates lower would have helped indie retailers absorb the higher energy costs. They will certainly need help as the rates for electric are increasing daily and we have just been told that one provider is charging 94p per kWh for electric – the highest we have seen so far,” he said.

Bira has written an open letter to the two Conservative leadership candidates, Rishi Sunak and Lizz Truss, urging them to take action including persuading energy companies to place a cap on energy increases for businesses.