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Energy Firms and Small UK Businesses: Supply Issues Amid Bankruptcy Fears

Updated: Dec 25, 2023


Business owners and industry professionals have informed the Guardian that major energy companies are refusing to service small businesses out of fear that they would go out of business and that some are even asking £10,000 upfront.

Business owners reported having trouble finding a supplier in the run-up to the busy October season for renewing gas and electricity contracts, leaving them with "extortionate" prices or requests for a deposit as the latest symptom of the worsening energy crisis.

SSE, Scottish Power, E. On Next, Drax, and Ecotricity are among the suppliers listed as having rejected service requests or demanded a deposit.

Business owners urged the government to take immediate action and cautioned that industries like hospitality, which are already dealing with inflation and the aftereffects of the Covid-19 outbreak, are particularly at risk.

Teresa Hodgson, the owner of the Green Man bar in Denham, close to Uxbridge, was initially informed by her supplier SSE that it was unable to provide her with an energy quote due to the rapid rise in rates.

When Hodgson finally got them to respond, they claimed they needed a £10,000 deposit before proceeding.

They explained that they needed security since they didn't think many pubs would survive this year when I questioned why since we've never had a problem.

She said, "There were other vendors who just wouldn't even consider it since it's hospitality."

In contrast to homes, corporations often purchase energy under multi-year contracts, frequently through a specialized broker who connects them with suppliers for a bid.

They switch to an out-of-contract "deemed" rate, which is uncapped and can soar in pace with market pricing if they are unable to obtain a fixed-rate contract.

Energy broker Inspired chief executive, Mark Dickinson, claimed that some energy companies were only opting to renew contracts with existing clients, "therefore they're withdrawing from new business." Effectively, [others] are stating that they do not even want to keep their current clients.

He claimed that the war in Ukraine had contributed to the erratic prices in the wholesale energy markets, making it more difficult for suppliers to set prices for long-term contracts. Bills have increased by as much as sixfold in some circumstances where they have agreed to fixed-rate contracts.

Due to the hesitation of credit insurers to give coverage if clients go out of business, energy companies have also had difficulty persuading them to do so.

Instead, suppliers are controlling their risk by requesting upfront bond payments from all clients, even repeat ones.

A recent trend that threatens bars' viability, according to the British Beer and Pub Association (BBPA), saw one of its members being rejected by five suppliers.

The lack of market competition is forcing pubs to sign extortionate contracts or continue paying punitive out-of-contract rates, according to Emma McClarkin, chief executive of the BBPA. "Many energy suppliers are now refusing to provide contracts to pubs, putting them in further jeopardy," she added.

Before this crisis pushes pubs and other businesses across the nation to close, the market is failing the hospitality sector, and we need an energy price cap.

The proprietor of Lily's beauty parlor in Whitchurch, Shropshire, Gemma Holt, claimed that it had been nearly impossible for her to renew her energy contract.

"We thought we had found a new energy supplier, but the first one we tried wouldn't take us on since we're a hair and beauty business and because of the energy usage, with the washing machine and tumble dryer running all the time," the customer said.

More than 200 bar tenants are leased by William Robinson's Robinsons Brewery company, which made an urgent plea for action.

The knock-on effect might be significant, he said, if the government doesn't handle this. It doesn't help us that they're taking the summer off. We cannot have a moment of paralysis; speed is crucial.

According to an E.ON representative, "like many other commercial energy suppliers, at certain highly volatile moments, we've had to delay providing contracts to new clients so we can focus on supporting existing customers during this difficult time while monitoring and responding to market concerns."

The spokeswoman for Scottish Power stated: "We continue to offer energy supply contracts directly to new and existing small business clients, and existing customers can also renew their contracts via their energy broker if they have chosen one."

Businesses must pass a credit check, according to statements made by Scottish Power and Ecotricity.


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