By Denis Sheehan MIH: End of energy support will be too much for too many.
The chancellor on the 15 March in his budget gave businesses 16 days notice of government ending their energy support on 31 March. No other support was announced to replace or cushion the impact on businesses already struggling with the highest energy costs in living memory.
He described his budget as “a budget for growth”, focusing his plans for business on what he described as “the four pillars of his industrial strategy”.
The four pillars being:
- Enterprise – supporting business.
- Employment – encouraging more people into work.
- Education – providing people with skills.
- Everywhere – growth across the UK.
Reading through the House of Commons Library summary of the Spring Budget 2023, finding evidence of any substance to the four pillars is a challenge. They are at best, nothing more than ambiguous statements.
The chancellor also happily quoted the Office for Budget Responsibility revising its Consumer Price Index forecast, saying it would fall to 2.9% by the end of 2023. Just seven days later, UK inflation rose to 10.4% in the year to February up from 10.1% in January.
He went on to set out inflation as the biggest challenge to the economy and as such, his number one priority. His withdrawal of energy support, alongside food and non-alcoholic drink inflation jumping to 18.2% in the year to February 2023, and countless other cost rises, leaves businesses with no option, other than going out of business, to raise their prices to consumers. This of course will lead to an inflation spiral.
The annual inflation rate for restaurants and hotels was 12.1% in February, up from 10.8% in January, with the Office for National Statistics saying, this is the highest rate for hospitality and catering since July 1991.
The increase in our industry’s prices to consumers can only continue to rise, principally due to the chancellor’s lack of any meaningful policy to counter growing cost pressures. This is not advanced economics, it is primary school maths.
Large scale business closures will follow the withdrawal of energy support, and those that do survive will only do so through increasing their prices.
Thursday saw the Bank of England raise interest rates by a quarter of a percentage point to 4.25% in response to the higher than expected UK inflation figures announced a few days previously. Yesterday the Bank of England Governor Andrew Bailey warned businesses raising prices would drive up the cost-of-living and hurt the ‘least well off’. Mr Bailey also said, in a thinly veiled threat, that increasing prices may have a knock-on impact on interest rates.
It seems that government and the Bank of England clearly have little regard for business, unless your name happens to be British Gas, EDF Energy, EON, Npower, Scottish Power, or SSE.
