Small business owners have voiced their concern and confusion after the Government announced its plan for an energy bill cap amid the ongoing cost-of-living crisis.
The wholesale cost of gas and electricity will be slashed for companies under a scheme which will run for six months starting in October, Business Secretary Jacob Rees-Mogg said, but some businesses have suggested VAT cuts as a better solution.
The founder of online retail gift company Betsy Benn based in Cheltenham, said she is “suspicious” about the six-month plan when the equivalent cap on household energy bills is set to last two years.
Six months just doesn't cut it for any kind of planning solution
Business owner Betsy Benn
Betsy Benn, 47, told the PA news agency: “Purely from a planning point of view, it is really disappointing. If the domestic cap is for two years, they are expecting rates to be unstable for two years – so why are they only making a plan for businesses for six months?
“Six months just doesn’t cut it for any kind of planning solution.
“There’s really not much information around it, it just seems to be a headline announcement again.
“I feel like (there) is pressure from the energy companies and I wonder if there is more for them to gain by not having a cap? I feel suspicious about it.”
Ms Benn is worried about her business’s use of electricity to make personalised gifts and already had plans to bring forward the company’s production of Christmas-themed items to avoid the expected price rise in October.
“We are just maintaining the frugal approach really, we’re putting as much effort into getting Christmas production done now and just compulsively going around the studio, switching off lights, switching off radiators,” she said.
“(But) if there’s no protection for small businesses after the initial six months, it’s concerning.
“It’s great that there is a cap for our peak trading period, but we are heading into a deep recession.
“I am confused and looking for more clarity.”
Paul Cook, director at The Angry Parrot micropub in Cheltenham, is also concerned about what lies beyond the next six months.
“This support’s only for six months, and I don’t mean to sound ungrateful, but what’s going to happen after those six months? Will it be enough to turn it all around? We need to make sure the public has disposable income,” Mr Cook, 50, told PA.
“Trade for us has already dropped off probably by about 40% in the past month. We’re looking towards the Christmas period and hoping this could help to kickstart things, but I don’t know.”
Mr Cook said that while “relief is welcome,” the future of his business relies on the spending power of the general public.
“It’s all well and good reducing the energy cap … but if the general public aren’t in the pubs, clubs and hospitality venues across England, then it makes no difference,” he said.
“People are trying to save money where they can. Covid obviously changed people’s behaviour, it’s all a bit of a cumulative effect really, and this is sort of the peak of it, I think.”
Mr Cook added: “VAT is always a killer, if we could reduce that that would be more than welcome. It’s all about cash flow for us.
“Any scrapping of business rates for the remainder of the year, that would be more than welcome.”
Another business owner, who runs a cafe and tea rooms in Beverley, in the East Riding of Yorkshire, joined Mr Cook in highlighting VAT cuts as something he believes would help more than an energy bill cap.
Robert Chapman, 56, said: “VAT cuts stimulate growth; you’re incentivised to open for longer hours, employ more staff, because you keep more of your takings.
“Our customer numbers are down, input costs are up. Obviously, our energy prices are up, our labour costs are up, everything is going in one direction. There’s a limit to how much you can pass on to customers.
“So, at some stage something has to give and whether that is the VAT rate, whether that’s businesses going bust, whether that’s prices going through the roof, but something has to give.
“It would be great if the Government took a proactive step … to manage us through this process rather than reacting to business failures which, obviously, is the only other sort of outcome really.”
But Sarah Laker, 52, owner of two independent stationery shops in Marple and Wilmslow in Cheshire, said she is “really pleased” with the Government’s plan.
“I think six months will see us through the worst of the winter and will help relieve the financial pressure,” Ms Laker said.
“I’m glad they are reviewing it though, as the problem hasn’t gone away, so I hope that further measures will be put into place.
“This will really help independent retail and the high street, at a time when we are still battling the long-term effects of the pandemic.
“It means I won’t have to put up prices again at the moment and it will also hopefully help all my suppliers maintain their current prices, which will in turn help my customers.”