Household bills are forecast to jump in January and diesel is near two pounds a litre, and a business has no price cap to hide behind

Energy Bills and Small Businesses

There is a laundrette at the end of my road that has been there since the 1960s. Eight washers, six dryers, a bench, a change machine that has never worked and a woman called Dolores who has run it for twenty-two years.

I went in on Thursday with a duvet and a question. What happens to her if the forecasts are right?

The Forecasts

A business bulletin on 1 October set them out. Under a heading about intensifying energy pressures, it reported that household bills are forecast to rise 16 per cent in January, and that diesel is reaching around two pounds a litre. The bill forecast is attributed to a consultancy that specialises in the energy market.

The cause, according to the same summary, is the conflict in the Middle East, which continues to affect global markets. Businesses and households face renewed pressure from energy, fuel and borrowing costs.

A second report the same day, on a survey of business confidence, added some detail. It said that sentiment had improved over the summer as fighting eased, and that the conflict had intensified again over the past month, pushing up energy costs just as the Budget came into view.

Why Businesses Are More Exposed

The sixteen per cent is a household figure. It refers to the cap that limits what suppliers can charge domestic customers. The cap moves up and down with wholesale prices, but it moves on a schedule and it softens the swings.

Businesses have no cap.

That surprises people. During the worst of the last energy crisis there was temporary support for firms. It ended. A business now pays whatever it agreed in its contract, and when the contract runs out, whatever the market offers on the day.

So for a business the question is not what happens in January. It is when the contract ends.

Dolores

Hers ends in March.

She showed me the last bill. I shall not print the figure, but gas and electricity together are her largest cost after rent. Larger than wages, because there is only her and a part-timer.

A laundrette is, when you think about it, a machine for turning gas into dry towels. The dryers run on it. The water is heated by it. There is no way to do the job with less. She has already replaced four of the six dryers with more efficient ones, on a loan.

The last time her contract came up, at the height of the previous crisis, her unit price roughly tripled overnight. She put a service wash up by two pounds and lost, she thinks, a fifth of her regulars. They are pensioners and people in bedsits without a machine. They did not go elsewhere. They washed less.

If March brings another jump, she does not know what she will do. She cannot put prices up again. She said, “They’ll just stop coming, and then what’s the point of me?”

Who Else

The businesses most exposed are the ones for whom energy is the product.

Laundrettes and dry cleaners. Bakeries. Fish and chip shops, which heat a vat of oil all day. Launderers serving hotels. Swimming pools. Small manufacturers with kilns or furnaces. Cold stores. Pubs with cellars to chill and kitchens to run.

An office-based firm barely notices. A solicitor’s energy bill is a rounding error. That is why these rises never seem to trouble the people who write about business. Most of us work at desks.

And Diesel

The fuel price is a separate blow and lands on a different set of firms.

Anyone who drives for a living. Couriers, plumbers, mobile hairdressers, the man who delivers to the Turkish grocer. Most are self-employed or work for very small outfits. They cannot easily pass on the cost. A delivery driver paid by the drop earns the same per parcel whether diesel is one fifty or two pounds.

It also feeds into the price of everything that arrives on a lorry, which is everything.

What Could Be Done

There are roughly three schools of thought.

The first says the state should step in, as it did before, with a temporary discount or cap for the most energy-intensive small firms. The argument is that these are viable businesses hit by a shock that is not their fault and will pass. Letting them close and then reopen later is wasteful, and many will not reopen.

The second says no. Support of that kind cost a vast sum last time and the government has nothing spare. Prices are a signal. If energy is dear, businesses should use less of it, invest in efficiency or change what they do. Subsidy dulls the signal and helps the wasteful along with the careful.

The third looks at the market itself. Small firms complain of being offered poor terms, of brokers who take hidden commissions, and of being unable to switch. Making the business energy market work properly would cost the taxpayer nothing.

I have most sympathy with the third and some with the first. The second is right in principle and not much use to a woman who has already bought the efficient dryers.

What Owners Can Do Now

Know when your contract ends. If it is in the next six months, start getting quotes now. Prices are volatile, and a fixed deal agreed on a quiet day may be much better than one agreed in a panic.

Be careful with brokers. Ask, in writing, what commission they are being paid by the supplier. You are entitled to know.

Read the meter yourself. Estimated bills for businesses are often wrong.

Check whether you are on the right kind of contract. Very small firms have some additional protections that larger ones do not, and suppliers do not always apply them.

And talk to your supplier early if you are going to struggle. They would generally prefer a payment plan to a bad debt.

The Duvet

It took forty minutes in the big dryer. Six pounds fifty. I asked Dolores what it cost her in gas. She worked it out on the back of a receipt. About half of that.

So on a duvet she clears three pounds and a bit, before rent, rates, the loan on the dryers and herself.

I have had that sum in my head all weekend. A sixteen per cent rise for households is a headline. For her it is the three pounds.

The London Prat has been complaining about the gas bill since before North Sea gas, and does so again in its British satirical news on the gas bill and its London satirical news about laundrettes. Bohiney Magazine covers a country where they leave the air conditioning on with the door open.

SOURCE: https://bohiney.com/