Cost of living and small businesses
The cost of living crisis is dominating the headlines when politics allows. There is no doubt that people are frightened to put their heating on. A friend told me yesterday that she used to use her smart meter to keep track of and cut down on spending, but now she’s scared to look at it. And this over a winter where the weather has been kinder than usual.
Big businesses that have high demand for energy such as manufacturing and engineering are facing eye watering increases. Why though is no one mentioning small businesses? The small hotel that used to pay £2,000 a month and is now facing monthly bills of £10,000. That’s £96,000 a year extra. It doesn’t take a genius to work out that passing those extra costs on to customers isn’t likely to persuade them to stay on for an extra night over the valentine weekend, especially when roses and dinner and drinks are all costing more too. Lower occupancy rates are all you need as a small hotelier trying to recoup pandemic induced losses.
We’re hearing from small businesses that they are being squeezed by rising costs and wages, skills shortages and slowing consumer spending. They are also experiencing slower payments as their customers delay settling invoices because they haven’t been paid themselves, or are offering extended payment terms. Some are talking about the prospect of not being able to afford broadband at a time when the drive is to get businesses to go digital. When cashflow is tight something has to give.
Worst of all some small business people are so strapped for cash that if they meet their business bills they can’t afford to give themselves a salary, leaving the household without an income. For these people energy costs are a double whammy. One restaurant owner told me about working 18 hours a day, with nothing left to pay himself and the only help his bank could offer was an overdraft. Once the overdraft and credit cards are maxed out the only option is to shut up shop. These are people who have worked hard all their lives but are facing losing their businesses. This is having a big impact on their mental health, relationships, family life and could ultimately leave them without a business and without a home.