The extra energy costs:
As it was announced today, households across the UK now face a record energy bill increase of 54% from April. Energy regulator Ofgem has raised the energy price cap. This is the maximum rate that suppliers can charge, this reflects the fourfold increase in energy prices over the last year.
This raise is the second major increase in energy bills in six months and is perhaps the largest on record. It is predicted to drive a large proportion of UK households into fuel poverty for the first time. More can be read about this here.
Millions of households will pay an extra £693 a year; those in England, Wales and Scotland could end up paying around £1971 a year for gas and electricity while those on a prepayment meter will see an even bigger rise.
Why the rise on the energy price cap?
There are many reasons that can be linked to the raise, some reasons include geopolitical tensions, a cold European winter in 2021 putting pressure on supplies, a windless summer affecting wind energy supply, and increased demand from Asia for natural gas.
The UK is harder hit as it is one of Europe’s largest consumers of natural gas – 85% of homes have gas central heating.
Since gas prices started to spike, around 28 retail energy supplies have collapsed which has impacted more than 4 million households. You can read more about this here.
Effects on business?
Companies naturally are also facing bill raises – this can mean they have to reduce/pause production, cease trading or cut jobs. It also means increased cost may have to be passed to customers through higher prices. Pay rises for employees are not predicted to be able to accommodate for rising living and energy costs.
Firms are calling for government support over the surging gas prices, appeals have been made to the government for action.
What will the chancellor do?
The Daily Mail has dubbed today as ‘Black Thursday’ for Brits, highlighting the 0.5% Bank of England rate increase and energy price cap rises.
The chancellor has responded to this by unveiling a multi-billion-pound package to help soften the blow on households, unfortunately however, he admitted it will hardly help to make a dent in the pain for families affected.
A-D band homes will get a £150 council tax rebate, while £200 government-backed discounts will temporarily keep electricity bills lower for everyone, this however must be repaid over 5 years. Sunak also announced a £150 million discretionary fund for councils to distribute to worse-off families.
Other increasing costs:
The Bank of England has raised interest rates for the second time in three months, this comes as energy prices soar and the cost of the weekly shop also increases. The interest now sits at 0.5% and mortgage rates are predicted to soar. Analysts are notably shocked that many members of the Monetary Policy Committee have pushed for a bigger increase to 0.75%, this suggests to many that they are alarmed at the pressures building up in the economy. Experts are warning that the cost-of-living crisis could last for years.
Along with the country recovering from pandemic costs, Boris Johnson is pressing ahead with his controversial rise in national insurance in April, despite other pressures. Official figures have also confirmed that rising energy, food and transport costs are swallowing up half of the disposable income of the poorest households. You can find out more about this here.
How we can help:
When talking about the energy cap increase, the cost-of-living crisis and interest rates increasing, our Managing Director, Paul Goodman highlighted that:
“We are now all used to the term “unprecedented times”, the pandemic has certainly been one of those. The pandemic has also highlighted that we cannot always control everything. As we are starting to emerge from the pandemic, we are still seeing factors emerging outside of our control as business owners.
Geo-political tension, climate conditions effecting energy supplies and costs. Whilst these types of factors remain outside our control, managing cash-flow is something we can all control, or at the very least understand our businesses cash requirements in the short term. Cash is the lifeblood of any business, whether emerging from losses or profits during the pandemic period, hitting the cash flow brick wall can topple a business at any time. These incidents tend to happen more so after merging from difficult economic times.
Therefore, our expert team are readily available to provide a free and independent review of your finances to ensure you have the right finances in place to avoid hitting any cash brick walls in the future.”
If you are in need of finance and you’re unsure of where to go from here, you can speak to one of our in-house experts. We pride ourselves on full UK coverage and around 100 year’s combined experience within the Goodman Team!
As industry leaders in Asset Based Lending and having won Invoice Finance Broker of the year, we have built a reputation for our outstanding services and a client centric approach. We can confidently conduct a full business finance review and offer one of the best, well-vetted lending panels in the UK Market.
We offer financial planning for cashflow gaps, MBO, MBI, acquisition finance, capex or property purchase. We have also have long and successful track record of supporting all sectors from construction, engineering, manufacturing, recruitment and many more! To read some of our case studies that attest to this, click here.