Ofgem needs more powers to save businesses amid energy crisis, BCC says
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Ofgem should be given more powers to strengthen regulation of the energy market and a temporary VAT cut on energy costs for businesses should be brought in, the British Chambers of Commerce (BCC) has said.
In a letter addressed to the Prime Minister, Chancellor of the Exchequer and both leadership candidates for the Conservative party, the body called for extra support for both businesses and households as the UK sits on the brink of a recession.
BCC research has shown that over the last 18 months, businesses have faced “unprecedented inflationary pressures”, with two thirds of firms in Q2 2022 expecting further price rises. Energy bills, raw materials, and labour costs are all cited as the top drivers of price rises.
The study also found a reduction in the percentage of firms expecting to grow in the next twelve months, from 63 per cent in Q1 to 54 per cent in Q2. In January, some 23 per cent of businesses surveyed were looking to scale down or even consider closure in response to rising costs.
BCC director general Shevaun Haviland, said: ““Since the start of 2021 we have been repeatedly hearing the same message: the cost-of-doing-business is increasing.
“At over 10 per cent, CPI inflation is at a 40-year high; interest rates are seeing the largest increase in 27 years, and eye-watering energy bills have created a perfect storm of increasing costs. The impact of these challenges on consumers, businesses, and wider society cannot be overstated.
“Consumer confidence reported at a 50-year low, and the Bank of England’s projections of a year-long recession, demonstrates that the cost-of-living crisis and the cost-of-doing-business crisis are two sides of the same coin.”
The Resolution Foundation also warned today that the physical and financial health of families is under threat this winter without radical support from the new Prime Minister.
With the price cap forecast to hit £3,600 in October and top £4,500 in January, the think tank said the UK was on course for a “winter catastrophe” with thousands of people having their power cut off and health endangered as they are unable to afford their household bills.
In a report, it argued that significant fresh support must take account of who is least able to cope with rising bills, namely low- and middle-income families, and recognise that surging prices will increase bills by more for some than others, including larger families and those in energy-inefficient homes.
It added that Liz Truss’ plan to reverse the recent rise in National Insurance contributions “completely misses the target”, with the richest fifth of households set to gain twice as much in cash terms as the entire poorest half of households together.
With energy firms currently making record profits due to the wholesale price of fuel, British Gas announced today it will contribute 10 per cent of its energy supply profits to help the most financially vulnerable customers who are struggling to pay their bills this winter.
With pre-tax profits of £98m in the first half of 2022 for British Gas Energy, the initial contribution of 10 per cent to the British Gas Energy Support Fund would be £9.8m, although the firm said it would boost this to £12m in its first one-off payments to the fund.
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