Five of the UK’s most powerful business groups have called for immediate and decisive government action to address the country’s energy crisis, warning that failure to do so will result in lower investment, increased poverty, and the risk of an inflationary spiral.
The heads of the CBI, the British Chambers of Commerce, the Institute of Directors, Make the UK, and the Federation of Small Businesses wrote to Rishi Sunak, claiming that “soaring” domestic and business bills would stymie economic recovery.
“As a group of business organizations, we are writing to urge you to act quickly and decisively to assist consumers with spiraling bills and to assist businesses in managing inflated costs over the medium term,” the letter stated.
When the price cap is lifted in April, Sunak and the business secretary, Kwasi Kwarteng, are working on possible measures to mitigate the impact of a nearly 50% increase in energy bills, amounting to £600 per year for the average household.
The energy regulator, Ofgem, will announce the new price cap early next month, and Kwarteng predicted that Sunak would outline a support package in his spring statement on March 23.
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The five business groups emphasized the likely damage to household budgets if the government fails to act, reflecting the growing concern felt by businesses of all sizes.
They pointed out that a £2,000 annual increase in the average household energy bill would add 1-2 percentage points to the annual inflation rate, which is already at a 30-year high of 5.4 percent, and push another 2 million people into fuel poverty.
“It will disproportionately affect low-income households,” the letter stated, “but these cost increases will have a ripple effect throughout the economy.” “As a result, we strongly urge [the] government to take steps to reduce rising domestic bills and assist the most vulnerable.”
Businesses have also seen steep increases in their energy bills, according to the letter, with more increases looming as fixed tariff contracts expire.
“Due to the severity of the crisis, businesses have little protection as they deal with rising wage, shipping, and tax costs.” Small and medium-sized businesses are the ones who are most vulnerable. “Many businesses will have no choice but to pass costs on to their customers, increasing inflationary pressure,” the groups predicted.
Britain, like other countries, has been affected by a rise in the global wholesale price of gas, which has been triggered in part by increased demand as countries recover from the pandemic.
However, the business groups claimed that the UK was in the midst of a medium-term crisis rather than a seasonal one.
“Businesses support a regulatory approach that builds resilience in the domestic supplier base, drives competitiveness in UK industry, and incentivizes investment in the green economy to strengthen the UK energy system for the future,” they said.
“A core part of this strategy must be reducing energy demand with an ambitious program for residential and commercial energy efficiency.”
“We understand the pressures people are facing with the cost of living,” a government spokesperson said. “We are providing support worth around £12 billion over two years to help families.”
“We’re focusing our assistance on the poorest people, and we’re specifically assisting households with their energy bills.” Furthermore, the energy price cap protects millions of consumers from rising global gas prices, and we’ll continue to listen to consumers and businesses on how to manage energy costs.”
