Corner stores have joined the chorus of UK businesses urging the government to offer help with energy costs, warning thousands risk going out of business without it.
The Convenience Stores Association, whose members make up about 70 percent of Britain’s 48,000 convenience stores, said it was “in all seriousness” forecasting mass closures as the “cost of doing business” rises.
James Lowman, chief executive of the ACS, wrote to Chancellor Nadhim Zahawi last week asking for a £575m aid package that includes a cap on commercial energy costs similar to that for homes.
“Many convenience store retailers, both small and large, report that they are not viable with the rising energy costs they now face,” Lowman wrote.
Sector regulator Ofgem on Friday raised the ceiling price on domestic gas and electricity by 80 per cent, equivalent to £3,539 for an average household. But the costs for businesses are not limited, even though their contractual relationships with energy providers are similar to those of households.
Energy costs for the convenience store sector are forecast to reach £2.5bn this year, according to the ACS, and are almost certain to rise significantly by 2023.
“Without actions to mitigate this, we will see towns, housing estates, neighborhoods and main streets lose their small shops,” he said.
Energy costs are a major issue for all retailers, but convenience stores are particularly at risk. Their bills are higher relative to sales due to the large proportion of refrigerated products, particularly soft drinks, alcohol and milk, in their stores.
The consumption levels of many points of sale are above the threshold that entitles them to the reduced rate of VAT on energy. Furthermore, they tend to be small family businesses with limited ability to invest in more energy-efficient refrigeration.
Convenience store profit margins are thin and average transaction sizes are small, limiting their ability to recoup some of the increased energy costs by raising the prices of other products.
Lowman pointed out that power rates were rising from a typical level of 20-25 pence per KWH to 70-80 pence per KWH or more, with smaller shops facing annual bills of up to £44,000 even before they went into business. last increases in force.
Its situation is similar to that of frozen food supermarket chain Iceland, which recently told investors that rising energy costs and declining household spending power would slash profits this year.
“A price cap for small businesses in line with domestic customers would limit these unsustainable cost increases,” Lowman said, suggesting that eligibility could be determined using Ofgem’s existing criteria for micro businesses.
Companies must have fewer than 10 employees, an annual turnover of less than €2 million, or an annual electricity consumption of less than 100,000 kWh to qualify as micro-enterprises.
The ACS called for the existing 50 percent reduction in business rates for small retail and hospitality businesses, a measure put in place in response to the Covid-19 pandemic, to be increased to 100 percent for the remainder of this fiscal year. .
He also wants next year’s inflationary rate hike cancelled. The increase is normally based on consumer price inflation in the previous September, which economists forecast at about 10 percent.
Treasury said it understood that people were struggling with rising prices. “While we can’t shield everyone from the global challenges we face, we are supporting British businesses to navigate the coming months,” he added, citing fuel tax cuts and existing measures on trade tariffs.