Wednesday, November 29, 2023

Could energy bills push small food businesses to collapse?

When the headlines started to pour out recently, talking about high energy bills, the focus for many was on householders and domestic bills. Here, Rick Smith, MD of Forbes Burton, an insolvency and business rescue specialist, asks what is in store for food manufacturers.

Rightly so, as many believe that this Winter will see many consumers in the UK slip not only into fuel poverty, but actually cross the poverty line too.

However, another real risk is small businesses, particularly food manufacturers or micro businesses, running into real financial difficulties thanks to the wild, uncapped prices that may be on the way.

There have already been multiple stories of businesses crying out for help with their energy bills, but there’s also many that have already closed up shop, including well-established restaurants, takeaways and small family businesses, some producing artisan food for generations.

The SME Insights Report, published by small business insurance provider Simply Business, also found that one third of UK businesses (36%) stated tax and national insurance hikes are their greatest concern.

The report found that 70% of SME owners say that rising costs across the board are their biggest challenge this year. Half (49%) said that they are set to increase their prices in an attempt to offset increased expenditure. One in five (21%) intend to raise prices by 6-10%, and for almost one in 10 owners (7%), these increases could be as much as 20%.

As a result, three in five (59%) small business owners are calling on the government to review or reduce the energy price cap. One fifth (21%) state that the VAT cut needs to be reviewed or extended, and over one in 10 (12%) feel that the government should review or reduce national insurance.

While the energy price caps do not apply to businesses directly, millions of small business owners are still experiencing increased energy bills at a time when costs are rising in most operational areas.

The report also lists that the greatest threats to SME survival in 2022 are:

Rising fuel and energy costs – 54%

Tax and national insurance hikes – 36%

Lack of funds or access to credit – 22%

Marketing and the ability to find customers – 26%

Recovering from pandemic related losses – 18%



It’s hard to see a way out here, most businesses in food lost a good amount of money during COVID, particularly in foodservice and hospitality and with other setbacks present in the world in recent years. Prime Minister Liz Truss means to bring the UK into a high wage, high productivity way of working, but more needs to be done to stimulate that growth as many still feel not enough has been done since COVID to prop up a huge amount of financial trauma that has taken place.

Consumers are already feeling the pinch due to recession warnings, but this, coupled with energy costs soaring may be too much of a squeeze from all sides for businesses.

Seeking help and advice about business debt or recovery? Talk to one of our team for a free consultation today.

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