From restaurants to laundry services, firms are braced for next crisis after Covid pandemic

“The future is far from certain,” says Julian Pariera, the owner of Beauchamp Laundry Services in Birmingham. “I’m extremely concerned at how things are panning out.”

Pariera is one of thousands of small business owners across the UK who will bear the brunt of the national energy crisis that risks driving the UK to a cost of living catastrophe within the next year. Before next winter, he will need to renegotiate an energy deal to run the washers and clothes dryers that his customers rely on after a record surge in energy market prices.

“We fix our energy tariffs for up to five years, and every time we renew a deal it seems to double. This time I won’t be surprised if our energy costs quadruple. It’s madness,” he says. “These costs can’t be reflected in our charges because if we put up our prices by this much our customers wouldn’t be able to afford it. So the question I have to ask myself is how we can manage while still protecting our customers?”

“The government talks about getting business back on track after Covid – and I’m not saying they’re doing a bad job – but with these cost pressures it’s just ridiculous. We’ll carry on somehow because this business has been in place for the last 30 years – we’re established – but if we were just starting out we wouldn’t manage,” Pariera says.

For now, it is still more affordable for many of Beauchamp Laundry’s customers to bring in damp clothes and linen to be tumble dried during the winter than to run their own dryers at home, Pariera says. But at some point in the next year he may need to adjust his dryers to offer fewer minutes for each pound spent. 

These concerns are shared by small business owners across the country, which employ almost 13 million staff and make £1.6tn in turnover every year. The Federation of Small Businesses has warned that energy costs are the top concern of its members and could prove to be “an existential threat”, particularly for the fragile end of the small business sectors that were hardest hit by Covid-19 restrictions.

Ibrahim Dogus, the owner of three restaurants near the London Eye, says a “vicious circle” of rising costs and falling revenue endemic across the hospitality industry means even longstanding eateries in prime locations are struggling to secure affordable energy deals. Many suppliers refuse to offer contracts to restaurants without a hefty security deposit, or charge eye-watering rates to guard against the risk they might go under, he says.

“Before the recent price hike I’d pay between £2,500 and £3,000 a month for energy at one restaurant. But my latest bill for November was £5,600. At the same time, turnover has fallen to between 10% and 15% of what it used to be. Before the pandemic we might serve 600 people; these days it’s closer to 60. But our costs are still climbing. We’re quite worried,” he says.

Dogus has already cut his staff from 60 to 25, made use of the government’s support schemes, and negotiated payment plans to manage the debt he owes to his landlords and pay business rates. But energy companies are the exception, he says, and this could prove the difference between whether his chain survives or not.

“Energy companies are not interested in helping at all. If you don’t pay in full for a couple of months someone comes to turn off your lights. Never mind that you can’t pay them if you can’t serve customers. It would be over,” he says.

“It’s a very difficult moment for small businesses. There’s been Brexit, there’s been Covid. But on top of everything else, energy costs could be the breaking point,” he says.