Energy Prices Threaten Survival Of Businesses In 2022 And Beyond
Energy prices threaten the survival of small businesses for the foreseeable future so it is something that should not be overlooked. According to Cornwall Insight energy prices are due to rise by potentially 65% by this Winter. This is likely to add to the struggles facing small businesses.
Based on average Quarterly Energy Prices published June 2022 by the government the average price for gas was 3.95 pence per kWh and for electricity, it was 18.4 in Quarter 1 for 2022. For micro businesses based on average consumption of 10,000 kWh of gas and the same again for electricity accordingly to Bionic that gave rise to costs of £395 for gas and £1,840 for electricity, totalling £2,235.
For high energy using small businesses that consumed an estimated additional 15,000 kWh for gas and 10,000 kWh for electricity, their estimated average cost was £4,668.
However, those figures come off the back of significant increases in the last 12 months. Cornwall Insight suggested in March 2022 in an article UK businesses face 250% gas bill increase.
The current position as of 31 May 2022 for the wholesale price of gas (forward delivery being typical prices paid by suppliers) according to Ofgem’s wholesale market indicators is 21.45 pence per kWh and 2.31 kWh for gas. That being already close to the average rates paid by businesses on average, suggests that prices will have a long way to go up before they come down again, potentially stretching many a small business.
Many small businesses could face an existential threat to keep their heads above water in the coming 12 months with some facing the threat of Liquidation looming large over them as they fight for survival.
The recent report from Cornwall Insight GB Power Market Outlook to 2030 shows energy prices scheduled to fall back. However, not until 2026 does it show prices falling anywhere close to pre 2021 historic averages. And even then its benchmark appears to show prices stabilising thereafter at something approaching a staggering double the pre 2021 level by 2030:
Instead of a sharp drop that plateaus in 2023-2024, this report forecasts a slower drop in prices before starting to plateau in 2028, mirroring the change in our gas forecasts.
This makes somewhat worrying reading for small business costs which will have to be absorbed.
The prospect would appear to be further pressure on UK households as these effects filter into products and services supplied by small businesses to them. This will be unwelcome for many consumers already shouldering the burden of fuel poverty, inflation and a cost of living crisis.
How Oliver Elliot Can Help With The Energy Price Issues
If you have a business that has suffered due to the rapid increase in energy prices with your margins slashed and are unable to see a way forward then contact us at the earliest opportunity for a free independent consultation to see what can be done.
If the business is insolvent and has other liabilities that are weighing it down such as a Bounce Back Loan and HMRC liabilities then it is likely to be time to get professional advice. As a Director, you may want to ensure you are not running the risk of Wrongful Trading which could put you personally at some possible risk of personal liability for company debts if the position continues to get worse. It can be crucial you can show you have taken every step available to you to address an insolvent position.
If necessary the company may need to be placed into Liquidation after exploring all the available options which may include rescue options such as Administration and a Company Voluntary Arrangement.
Key Fact: What Actually Is A Liquidation?
A Liquidation is a formal insolvency procedure that enables a company and its Director(s) to comply with their duties.
Goode on Principles of Corporate Insolvency Law fifth edition, at paragraph 1-40, Professor Goode describes the nature of winding up through a Liquidation as follows:
Winding up or liquidation, is a collective insolvency process leading to the end of the company’s existence (dissolution). The principal role of the liquidator is to collect in and realise the assets, ascertain claims, investigate the causes of failure and, after covering the expenses of the liquidation, distribute the net proceeds by way of dividend to creditors in the order of priority laid down by the Insolvency Act and Insolvency Rules.
Are you a UK company Director?
If you are a Director of an insolvent company or a bankruptcy, Oliver Elliot can help you. We Know Insolvency Inside Out.
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Disclaimer: Energy Prices Threaten Survival Of Small Businesses In 2022
This page is not legal advice and should not be relied upon as such. This article is provided for information purposes only. You can contact us on the specific facts of your case to obtain relevant advice via a Free Initial Consultation.
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