Small business owners have expressed concern and confusion after the government announced its plan to cap energy bills amid the ongoing cost of living crisis.
Wholesale costs of gas and electricity will be cut for businesses under a scheme lasting six months from October, Economics Secretary Jacob Rees-Mogg said, but some companies have suggested VAT cuts as a better solution.
The founder of online gift company Betsy Benn, based in Cheltenham, said she is “suspicious” about the six-month plan, when the equivalent limit on household energy bills will last two years.
Betsy Benn, 47, told the PA news agency: “Purely from a planning standpoint, it’s really disappointing. If the domestic cap is for two years, they expect rates to be unstable for two years – so why only make a six-month business plan?
“Six months just isn’t enough for a scheduling solution.
“There’s not really much information around it, it just seems to be another headline announcement.
“I feel there is (there) pressure from the energy companies and I wonder if they have more to gain from not having a cap? I’m suspicious of it.”
Ms. Benn is concerned about her company’s electricity usage to make personalized gifts and already had plans to bring the company’s production of Christmas items forward to avoid the projected price hike in October.
“We’re just sticking to the frugal approach, we’re putting as much effort into getting the Christmas production done now and just compulsively going around the studio, turning off the lights, turning off radiators,” she said.
“(But) if there’s no protection for small businesses after the first six months, that’s worrying.
“It’s great that there is a limit to our peak trading period, but we are heading into a deep recession.
“I’m confused and looking for more clarity.”
Paul Cook, director of The Angry Parrot micropub in Cheltenham, is also concerned about what comes after the next six months.
“This support is only for six months, and I don’t want to sound ungrateful, but what’s going to happen after those six months? Will it be enough to turn everything around? We need to make sure the public has a disposable income,” Cook, 50, told PA.
“Trade for us has already fallen about 40% in the past month. We’re looking forward to the Christmas season and hope this can help get things going, but I don’t know.”
Mr Cook said that while “help is welcome”, the future of his business depends on the purchasing power of the general public.
“It’s all well and good to lower the energy limit… but if the general public isn’t in the pubs, clubs and hangouts across England it makes no difference,” he said.
“People try to save money where they can. Covid has clearly changed people’s behavior, it’s all kind of a cumulative effect really, and this is kind of the pinnacle of it, I think.”
Mr Cook added: “VAT is always a killer, if we could reduce that it would be more than welcome. It’s all about cash flow for us.
“A possible cancellation of the business rates for the rest of the year 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 the VAT cuts as something he believes would help more than a cap on energy bills.
Robert Chapman, 56, said: “VAT cuts boost growth; you are incentivized to open longer, hire more staff, because you keep more of your income.
“Our customer numbers have fallen, input costs have risen. Obviously, our energy prices are rising, our labor costs are rising, everything is going in one direction. There is a limit to how much you can pass on to customers.
“So, at some point, something has to be given and whether that’s the VAT rate, or companies go out of business, or prices go through the roof, but something has to be given.
“It would be great if the government took a proactive step … to guide us through this process rather than reacting to corporate failures, which is of course the only other kind of outcome.”
But Sarah Laker, 52, who owns two independent stationery stores in Marple and Wilmslow in Cheshire, said she is “very happy” with the government’s plan.
“I think six months will get us through the worst of the winter and help ease the financial pressure,” Ms Laker said.
“However, I’m glad they’re reviewing it, as the problem hasn’t gone away, so I hope further action will be taken.
“This will really help independent retail and high street shopping at a time when we are still battling the long-term effects of the pandemic.
“It means I don’t have to raise prices at this point and hopefully it will also help all my suppliers maintain their current prices, which in turn will help my customers.”