Trade groups representing up to four million small businesses have told the government that firms locked into expensive fixed price energy contracts should be legally freed to renegotiate them.
The Federation of Small Businesses & the British Chamber of Commerce independently allege that price gouging last summer by suppliers and their brokers has left family firms and small traders tied into excessive deals.
The resulting plight afflicting as many as 1 million SMEs amounts to Britain’s “greatest mis-selling scandal since PPI”, a third trade group has reportedly alleged in its letter to energy secretary Grant Shapps.
The groups say their polling indicates many member enterprises were left hooked on expensive deals, imposed last year as prices to commercial customers soared as much as fourfold in the aftermath of Russia’s Ukraine invasion.
At the time, say the groups, the effects on wholesale power prices of Putin’s aggression left small firms struggling to find suppliers. Many either refused outright to supply small businesses or else demanded hefty signing on fees upfront.
After six months of support delivered by its Energy Bill Discount Scheme, two weeks ago the government drastically cut help for firms still facing unprecedented heat and power costs. Though extended until next March, its new levels offer less generous compensation.
The Federation of Small Businesses wrote last month to ministers and to Ofgem, seeking their approval to free up firms wanting to re-open talks with suppliers and their agents. “Blending and extending” contracts is among solutions promposed by the advocates, enabling members to leave dear fixed deals, and opt instead for today’s partial recovery of normality.
“Small firms that fixed their energy contracts last year will see their bills rise by three or even four-fold as prices revert back to high prices and to pre-Energy Bill Relief Scheme levels”, FSB policy director Tina McKenzie wrote this month on the group’s blog.
“We found that 24% of small firms are trapped in fixed contracts, and of them, 28% say they could be forced to downsize, close or restructuring their businesses,”, McKenzie warned. “This equates to 370,000 small businesses, and not to mention the jobs and communities which depend upon them.
“Let’s not forget these small businesses are the ones that pushed through Covid and the energy crisis in winter despite their very limited resources. These firms deserve a fighting chance this year”, she wrote to FSB members.
As reported in today’s Guardian, the Confederation of British Metalformers has told Shapps expensive price commitments snagging up to 1 million firms is Britain’s “biggest mis-selling scandal since PPI”.
Quoted by the newspaper, CBM president Stephen Morley tells the energy secretary that small manufacturers face a “perilous situation”, threatening “another nail in the coffin of the British manufacturing sector”. Morley alleges that energy suppliers and brokers make “huge profits at the expense of UK competitiveness”.
Ofgem reportedly wrote last month to chancellor Jeremy Hunt, telling him that companies were facing energy bills which are “higher than is explained by market conditions”. The regulator says it has learned of steeply increased deposits sought by suppliers to guarantee commercial supply, including dearer standing charges.