Second jobs, pub closures and small businesses squeezed as energy prices surge

The cost-of-living crisis and the looming spectre of recession precipitated by soaring energy bills is having unexpected effects, including people having to take on second jobs to pay the bills and brewery companies warning of mass pub closures in the face of a 300 per cent hike in energy costs.

It has also been revealed that small businesses in the UK are owed on average almost £23,000 from overdue invoices – a 6 per cent year-on-year rise – as customers and suppliers try to delay payment for as long as possible, feeling the pinch in their own cashflow.

Rising energy bills have also been suggested as predicating an early end for many people to the flexible working concepts introduced during the pandemic, given the additional costs of heating and lighting required when working from home. Returning to the office, where the employer picks up the electricity tab, could hold strong appeal – especially during the winter months.

A survey by KIS Finance has found that nearly one-third of 18 to 35-year-olds have been forced to take on an additional job in order to make ends meet. This number has increased significantly since a similar survey by KIS earlier this year, which then found that around a quarter of young people had been forced into secondary employment.

The announcement that the 80 per cent increase in the energy price cap will take the average annual bill to £3,549 will mean that even more people will struggle to get by on their current household income. The physical and mental toll of juggling multiple jobs is likely to be a further devastating impact of the current cost-of-living crisis, with young people amongst the hardest hit.

The KIS survey found that 31 per cent of those aged 18 to 35 have taken on an additional job to help them afford basic items such as rent, heating and food, while 63 per cent of the overall population reported they are already struggling financially and expect things to get significantly worse in the near future. This is up from 57 per cent earlier in the year.

The South-East has reportedly been hardest hit, especially in London where high house prices and living costs have led to over 20 per cent of those surveyed across all age ranges needing to take on an additional role. As a result of the fiscal squeeze, 69 per cent of those aged 18 to 25 said they don’t expect to be in a position to buy their first home within the next 10 years.

Although the recent unemployment figures from the Office of National Statistics (ONS) suggested that the rate has levelled off at 3.8 per cent over the last two quarters, this figure is masking the fact that many people are now working more than one job just to get by. Young people in particular have been hit hard, typically being those at the lower end of pay scales.

Inflation rising to a 40-year high of 9.4 per cent – and predicted to rise further into double figures – is also diminishing living standards, putting greater pressure on household budgets. Further interest rate hikes are also set to make an already grim situation even worse.

As the cost of commercial borrowing increases, landlords may feel obliged to raise rents in order to remain viable, causing further pressure and misery for those in the rental market. These factors also impact the business sector.

For example, brewing industry bosses have warned today that pubs and brewers across the UK are at risk of closure within months given the energy price hikes of close to 300 per cent.

The bosses of six of the UK’s biggest pub and brewing companies have signed an open letter to the Government urging it to act in order to avoid “real and serious irreversible” damage to the sector. Greene King, JW Lees, Carlsberg Marston’s, Admiral Taverns, Drake & Morgan and St Austell Brewery all signed the letter.

Out-of-control gas prices following the invasion of Ukraine by Russia have contributed to rocketing energy bills for operators. On Friday, regulator Ofgem confirmed that bills for an average UK household would surge by 80 per cent in October when the new price cap comes into force.

However, businesses operate without a regulated price cap, with some pub owners warning that their bills have quadrupled or are struggling to even find suppliers willing to power their venues when contracts come up for renewal.

William Lees Jones, managing director of the JW Lees pub group, said: “We have publicans who are experiencing 300 per cent-plus increases in energy costs and some energy companies are refusing to even quote for supply. In some instances, tenants are giving us notice since their businesses do not stack up with energy at these costs.

“These are not just pubs, but people’s homes and the hearts of the communities that they sit in. Government needs to extend the energy cap to business as well as households.”

Nick Mackenzie, chief executive officer of 2,700-strong pub chain group Greene King, said one tenant has seen their energy bill jump by £33,000 for the year.

Mackenzie said: “While the Government has introduced measures to help households cope with this spike in prices, businesses are having to face this alone and it is only going to get worse come the autumn.

“Without immediate government intervention to support the sector, we could face the prospect of pubs being unable to pay their bills, jobs being lost and beloved locals across the country forced to close their doors, meaning all the good work done to keep pubs open during the pandemic could be wasted.”

The bosses, who sit on the board of British Beer and Pub Association (BBPA) have demanded the Government implement an urgent support package that effectively caps the price of energy for businesses.

It comes as knock-on effects from rising energy bills are also impacting the sector, with CF Fertilisers, one of the UK’s biggest CO2 producers, revealing it will halt production at its remaining UK ammonia site due to rocketing costs.

Brewers have warned that they could face disruption if there is a shortfall in supply of CO2, which is used in the production of some beer.

Emma McClarkin, chief executive of the BBPA, said: “This rise in energy costs will cause more damage to our industry than the pandemic did if nothing is done in the next few weeks; consumers will now be thinking even more carefully about where they spend their money.

“There are pubs that weathered the storm of the past two years that now face closure because of rocketing energy bills for both them and their customers.”

A Government spokesperson said: “No government can control the global factors pushing up the price of energy and other business costs, but we will continue to support the hospitality sector in navigating the months ahead.

“That includes providing a 50 per cent business rates relief for businesses across the UK, freezing alcohol duty rates on beer, cider, wine and spirits and reducing employer national insurance. This is in addition to the billions in grants and loans offered throughout the pandemic.”

Meanwhile, many small businesses are experiencing fresh difficulty in even getting paid for work done or services supplied, with overdue invoices piling up and cashflow drying up.

According to new data from accounting software Intuit QuickBooks, small businesses were owed almost £23,000 in late payments in May this year, adding to the sky-rocketing energy bills that are piling pressure on concerned business owners.

Late payments totalled £22,700 for the average small business, with at least one overdue invoice in May, representing a 6 per cent year-on-year rise. This monetary figure also represents around 65 per cent of their average monthly turnover, highlighting the severity of impact. According to Intuit’s data, almost two-thirds of invoices owed to small business were overdue in May.

Companies are expected to pay most invoices within 30 days to their small suppliers, according to the Prompt Payment Code set by a government body representing small businesses. However, many big firms fall short of these standards and independent businesses are left with overdue invoices or are not being paid the full amount they are owed.

This is leaving them with significantly less money at a time when the cost-of-living crisis is worsening and companies are being hit with much higher bills, the researchers warned. This disturbing trend has prompted a growing number of small businesses to call on the Government to provide urgent support to prevent them buckling under the energy crisis.

On Friday last week, the Federation of Small Businesses (FSB) said that many small firms could be forced to shut down if they cannot pay their bills. As with the breweries and pubs, there is no price cap for most businesses, so many will see their energy costs go through the roof.

Martin McTague, national chair of the FSB, said: “Unlike large corporates, small firms cannot hedge costs and negotiate deals with their large energy suppliers. Many of our members say the eye-watering energy bills could be the final nail in the coffin as they struggle to get through winter.

“We don’t have the luxury to wait until the winter, and inaction from our new prime minister could spell the end for many businesses.”

A quarter of small to medium enterprises said higher energy bills will be unsustainable within 12 months, YouGov said in a recent survey.

A Government spokesperson said: “We are determined to see late payments reduced to ensure that small businesses are given the best chance of succeeding and growing, which is why we recently reformed our Prompt Payment Code to ensure best practice in payment culture.”

It has also been suggested that the skyrocketing energy costs might also reshape the already malleable workplace arrangements that have evolved as a result of the Covid-19 pandemic, with an additional £2,500 a year potentially being added to people’s utility bills as a result of working from home.

According to forecasts from energy market analysts Cornwall Insight, the rise in domestic energy bills could reach £5,400 in January before increasing further to over £6,600 per year by Q2 2023.

In this scenario, average monthly energy bills will hit £789 in January for home workers compared with £580 for those who go to the office, according to price comparison site Uswitch. Remote working will still add £131 to energy bills each month from October, Uswitch found, with an extra 75 per cent gas per day during winter and 25 per cent more electricity being used compared to workers who go to the office five days a week.

The winter months in particular could see more workers choosing to go back to the office, as the cost of lighting and heating a home stack up. According to calculations based on figures from Citizens Advice, boiling a kettle three times a day will add £8 a month to energy bills – approximately £100 a year under the October energy price cap – while running a desktop computer for eight hours a day could cost around £35 a month. Using the oven to heat up a lunchtime meal would likely add around £23 to the monthly bills.

According to employment consultancy Advanced Workplace Associates, the average office attendance for Britons is now one and a half days per week, or around 29 per cent across the UK overall. In London, the ONS said that 37 per cent of professionals continued to stay away from the office in July. Prior to the pandemic, only 14 per cent of Londoners worked remotely.

Any increases in domestic energy bills should be compared with the savings gained by not commuting to work, which for many people would otherwise require a sizeable investment in either a public transport season ticket or the petrol/diesel and general running costs for a private vehicle. Given the high fuel costs at the pump, this is not an insignificant consideration.

The unfolding national crisis is not being helped by the perceived inaction of a so-called ‘zombie government’, with the interminable search for a new Tory party leader dragging on into September. Liz Truss currently leads the polls to win the leadership contest, but Truss has refused to confirm concrete details of how she would deal with the converging cost-of-living and energy crises should she eventually be parachuted into the role of Prime Minister.

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