Energy bill reduction welcomed but plans ‘too short term’ – wholesalers

The Energy Bill Relief Scheme will provide businesses with reduced energy costs for six months in a bid to avoid mass bankruptcy and job losses this winter, but while the measures are welcomed by the sector, wholesalers say a longer-term plan is needed

The scheme, part of a wider government support package, will fix prices for all non-domestic energy customers, resulting in energy bills cut by around half their expected level.

While the wholesale sector welcomes this positive move, in a statement FWD Chief Executive James Bielby identified the need for clarity around what happens after the six months is up. Wholesalers are in agreement – the news is positive, but a longer-term plan is needed.

Adam Reader, Finance Director of Wanis International Foods says: “It is essential that the inflationary spiral is broken. The sector needs certainty and while six months is welcome, it is too short term.”

“The step change to the variable rate is only being deferred and so businesses still have the axe hanging over them. Unless something fundamental changes in the energy sector before then, business will have some tough times ahead about how to price these prices increases into their operating model.”

Breathing space

John Kinney, Managing Director of Unitas Wholesale, also voices concern about the short-term nature of the support:

“While it is positive news that government is trying to address the issue of increasing energy costs, until our members know exactly what their energy costs will be, there is still real concern over what businesses will have to pay, as despite the cap, businesses are still going to see massive increases in their energy costs. This far from cures the problem – six months isn’t long enough to plan ahead – but it gives businesses some breathing space.”

Tom Gittins, Managing Director of Confex, says: “Wholesalers are experiencing up to 500% increases in their energy costs – a cost which on average now accounts for 22% of their overall business costs. The government has done well to ensure this support is swift and does not involve any claims or delayed rebates.

“This support will allow wholesalers some delay in passing on food inflation costs (averaging 20% as we tie down our food commodity pricing for the next 12 months) to their customers across both retail and hospitality. In turn, this will help to ensure consumers do not carry the full brunt of these fixed-cost increases and help to ease the cost-of-living crisis for everyone who buys food and drink across the UK.”

However, he is quick to point out that there is a real need for the role of wholesale in the UK food supply chain to be recognised by government, particularly when reviewing the scheme with an option to extend support for ‘vulnerable businesses’.

“It is vital that wholesalers are confirmed as ‘vulnerable’ businesses and will be included in all future government energy support,” he says. “We hope that they will acknowledge the part that wholesale plays in the UK food supply chain, and the fact that both the retail and foodservice industries would fall apart without regional and local wholesalers.”

Andy Needham, Managing Director of Morris & Son and Approved Foods, also has concerns about how the extended support will be awarded.

“I don’t think wholesale is recognised as a vital link in the chain. Often we are unable to pass increases through as easily as a manufacturer or a retailer – we’re the squeezed middlemen. We need to fight to be included in the longer-term support pool.”

Proactive measures

Andy Needham has already taken proactive measures to reduce consumption within the business after his electricity rates increased from 16p/KWH to 80p/KWH, a fivefold increase taking his current £50,000 bill to “more than £250,000”.

He welcomes the cap both for his business and those of his customers: “The cap at 21.1p/KWH is extremely welcome and will help to ensure that many businesses will be able to carry on trading, which would not have been the case without the government intervening.

“For our customers, the burden of the decisions they were going to have to make, such as paying the electric to keep the lights on versus paying suppliers will have reduced, which in turn will ease the potential for bad debts and business failures.”

Additional pressures

And of course, rising energy costs are not the only pressure facing wholesale and its customers.

“In food and drink, price inflation is off the scale at 20%+ and has been for at least the last six months,” said Needham. “The cost of fuel is still a huge burden and the reduction in cost from lower oil prices is not being passed through the chain. This needs looking at urgently.”

Rob Eastwood, Managing Director of Small Beer, an independent out-of-home wholesaler, knows that his customers are facing a multitude of pressures, including energy costs.

“It has been a mounting worry for many business owners that this winter could cripple them financially. Now I hope this has given most of them a fighting chance, but that is all it is. More needs to be done to meet the growing stealth taxation costs for hospitality businesses, not least a prudent look at alcohol duty, to save the country reaching a £10 pint very soon. Suppliers have crippling costs of production and distribution and a freeze, or even a reduction, in alcohol duty will help to balance those off a little.”

Adam Reader Andy Needham Confex energy Energy Bill Relief Scheme FWD Government James Bielby John Kinney Morris and Son Rob Eastwood Small Beer Ltd Tom Gittens Unitas Wholesale Wanis International