Energy bills crisis ‘worse than COVID pandemic’ for businesses, warns industry chief

File photo dated 29/01/21 of chains securing the doors of a closed Fuller's pub in London. Pubs and brewers across the UK are at risk of closure within months amid price hikes upwards of 300%, industry bosses have warned. Issue date: Tuesday August 30, 2022.
Industry experts have warned half of UK pubs may be forced to close this winter due to soaring energy bills. (PA)

Rising energy bills are hitting businesses harder than the pandemic and previous recessions, an industry chief has said.

Households and businesses are seeing record breaking increases to their energy costs, with experts warning half of UK households could fall into fuel poverty by 2023 and half of small businesses are at risk of closure.

New prime minister Liz Truss has promised she will "deliver" on energy bills and provide a solution to the crisis, with reports she is planning to freeze the household energy price cap at £2,500.

Read more: Most Brits don’t trust Liz Truss to deal with the cost-of-living crisis, poll finds

The cap does not protect businesses, some of which are seeing catastrophic increases in their outgoings.

Tina McKenzie, UK policy and advocacy chair of the Federation of Small Businesses (FSB) warned MPs on Tuesday that rising energy prices are so severe many businesses fear they will not make it through the winter.

“The only thing they can think is that it is time to close the door... you're talking about over 16 million people employed," she said at a business, energy, and industrial (BEIS) select committee.

"You're talking about over 50% of the GDP of the United Kingdom, you're talking about the high streets being decimated…

"This is absolutely the most serious thing we've seen - and we've been through COVID and we've been through other recessions.”

Ofgem confirmed the increase to the energy price cap (Yahoo News UK/Flourish)
Ofgem confirmed the increase to the energy price cap (Yahoo News UK/Flourish)

McKenzie called for the government to take some "unfair" rates off 200,000 small businesses, the introduction of an energy cap for businesses, and a cut to fuel duty in response to the worsening crisis.

It comes after Tom Stainer, the chief executive of the Campaign for Real Ale (CAMRA) group, said some pubs are seeing bills go up by 500% to 600%.

A report by SME Insights, commissioned by Simply Business, said it found 54% of small and medium enterprises (SMEs) said huge increases in the cost of energy could force their closure.

One pub in Dorset saw its energy bill rocket by £58,000, forcing its closure.

Read more: Energy bills: Kidney patients forced to skip dialysis treatment more likely to die, charity warns

"It is with a heavy heart and great regret to say that The Fontmell will close with immediate effect other than to honour the bed and breakfast bookings that we already have," the pub owners posted on Facebook.

"This is not a decision that has been made lightly and we would like to thank all our guests for their support and help over the last 6 and a half years."

Elsewhere, the Association of Convenience Stores (ACS) in August wrote to chancellor Nadhim Zahawi warning stores will be forced to close without a government intervention.

It comes as Truss prepares to lay out her government's agenda after being appointed prime minister on Tuesday.

Watch: Cost of living: Truss set to freeze energy bills in first major policy initiative