But the Conservative Party has been in power since 2010, Johnson-speak, giving more than enough political cycles to change course. However, British households will face an 80% increase in their energy and gas bills when the energy price cap rises from October. Businesses, meanwhile, are already struggling to afford higher utility bills – paying the price of the government’s magical reality.
Over the past couple of months, the public debate about how to deal with rising electricity and gas prices has largely focused on helping families. Neither current front-runner Liz Truss nor challenger Rishi Sunak have offered concrete solutions to win the race for No. 10, but the risks to small businesses are worth mentioning.
Families face harsh winters, and the poor struggle to heat their homes. Even relatively well-off families must shift much, if not all, of their needs to light and heat their homes. Against that backdrop, the plight of normally wealthy business owners may seem trivial. But there are thousands of jobs at risk, and their needs must be considered.
She was asked earlier this week how the Trust plans to support business owners. Her response crossed the line between fact and fiction: “You’ve heard me talk about the power supply and that’s why I think connecting to the supply is the solution to this problem. In the long run she is right; But there is zero prospect of the UK bringing in more supply to meet the energy shortages it faces next winter, and its pledge not to tap into power cuts could come back to haunt it.
Unlike UK retail customers, SMEs are vulnerable to the recent brutality in wholesale electricity prices as they are not protected by energy price capital. For some companies, costs can quadruple when their utility contracts are renewed, which is typically something between now and the end of the year. In one example that has caused a stir among small business owners on social media this week, the daughter of a small cafe owner in Leicester revealed her annual electricity bill is set to jump to £55,000 ($64,000) after all. During the month, it had already risen to almost £10,000.
UK businesses are not the only ones in need of government intervention. The rest of Europe is also doing very little to help family-owned businesses and small companies. Earlier this week, the German government said it was concerned that the country’s fabled Mittelstand sector was shutting down production due to rising energy costs.
Small businesses faced with large energy price increases have limited options: accept lower profits, pass the increase on to customers as much as possible, or ultimately cut jobs or close their doors. Central bankers are concerned that wages may rise as workers take advantage of tight labor markets to demand higher wages amid rising consumer prices around the world. But the so-called second-round hike is also where businesses raise the prices of goods and services to offset the impact of higher energy prices. Policymakers may face a more persistent inflation outlook than they currently anticipate.
So what is the solution? One short-term option is to extend the price ceiling to small enterprises, treating cafes, owner-owned pubs, corner shops, bakeries and other family-owned businesses as family businesses. In practice most of them; For example, pub owners often live above the pub. Bridging the gap between families who run businesses from their homes and those who don’t.
The regulatory system also needs to be improved. Some companies have weathered the crisis by securing multi-year contracts before prices exploded early last year. But when their suppliers fail, they lose that protection, which seems unfair. The government should intervene to stop the refusal to sell utility services to small businesses unless it is to cover the risk of bankruptcy if they do not pay a large deposit.
Above all, politicians across Europe need to discuss not only how to help families, but also the jobs that families rely on in the thousands of small and medium-sized companies. Otherwise, there is a risk that the winter power drama will turn into a full-blown economic crisis.
More from Bloomberg Commentary:
• Britain’s energy crisis won’t steal Christmas: Andrea Felstead
• As gas prices soar, UK needs real energy plan: Editorial.
• Keeping European lights will be very difficult this winter: opinion summary
This column does not necessarily reflect the views of the editorial board or Bloomberg LP and its owners.
Javier Blas is a Bloomberg Opinion columnist covering energy and commodities. A former reporter for Bloomberg News and commodities editor at the Financial Times, he is the author of “A World for Sale: Traders Who Exchange Money, Power and the Earth’s Resources.”
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