A STARK warning has been given that up to two thirds of small businesses in Scotland may be unable to continue trading viably unless there is government support to help them survive the energy crisis.
The prediction has been made as businesses – already struggling to recover from losses and debt incurred during the pandemic – face rocketing energy bills, with even small premises seeing prices double or treble compared to previous contract rates, costing them up to an extra £60,000 a year.
Unless urgent support is given there will be a catastrophic effect on the economy with many cafes, restaurants, bars, hotels, culture venues and nightclubs forced to close, sending thousands of people out of work, according to Gavin Stevenson (below), vice-chair of Night Time Industries Association (NTIA) Scotland.
He said that if no action is taken, and with more businesses falling out of their energy contracts each month, up to 50% of small businesses in Scotland could reach a tipping point in the next 12 months and up to two thirds in the next 18 months.
“This will be the last straw that breaks the camel’s back for a lot of businesses,” he said. “They have gone through Covid and incurred pretty big amounts of debt to survive and servicing that is consuming all of what would previously have been their profit. Now they have huge energy bills on top of that. There is just is not the money to pay it.”
He said he knew of one business owner facing a jump to close to £90,000 from £35,000 for his electricity.
“It is completely unsustainable as that is someone that would normally make a profit of £30,000 a year so where is that money going to come from?
“It is a dire, desperate position and the Government needs to step in and do something that radically lowers the cost of electricity and gas for small businesses because this is not survivable or in any way sustainable.”
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Stevenson added that some businesses were already “past the point of no return”.
He said the hospitality sector in particular is being discriminated against by the energy companies as they are branded high risk and are being penalised by higher rates compared to other commercial properties because they had been unable to pay bills during the pandemic when they were closed due to government restrictions.
“The electricity companies are behaving shamelessly here,” said
Stevenson. “The government has to act. At the very least they need to include small businesses in the energy price cap and they need to prevent discrimination against the hospitality sector and late night economy.”
HE said the contribution the hospitality sector made to the economy should be recognised.
“It is a £10bn a year sector in Scotland and contributes billions a year in taxes to pay for our public services, but it is a sector that has been battered and bruised by two years of Covid and is not in a position to survive this.
“We have VAT going up in April, we have full business rates kicking back in in Scotland much faster than elsewhere in the UK and there is much less support here for business rates this year.
“We have a cost-of-living crisis so the last thing any business wants to do at the moment is put up prices but when these bills are coming in, and they are many tens of thousands of pounds a year more, these businesses will have no choice – they either have to pass on increases to customers or they will go bankrupt.”
Stevenson added: “The majority of employment is in small businesses in Scotland and if both Governments don’t do something to help they very much risk killing the goose that laid the golden egg. We all want to play our part, we all want to contribute to keep our public services running, to keep our staff employed, to provide the cultural experiences and community occasions and all the other benefits our sector gives to society but if the businesses don’t survive all of that goes.
“When you have a tax burden of around 45% across our sector in general that is not sustainable when you then have energy costs going up so much. If these cost increases continue it’ll put anyone out of business unless they raise prices massively or government steps in to help.”
A Scottish Government spokesperson said: “Since the start of the pandemic, businesses have benefited from more than £4.5 billion in support from the Scottish Government, including non-domestic rates reliefs which has saved businesses around £1.6 billion since April 1, 2020.
“We are extending retail, hospitality and leisure business relief by offering 50% for the first three months of 2022-23, capped at £27,500 per ratepayer, following two years of 100% relief.
“Many thousands of small businesses will continue to benefit from the UK’s most generous Small Business Bonus Scheme, which takes more than 111,000 properties out of rates altogether.”
The UK Department for Business, Energy and Industrial Strategy was contacted for comment.
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