75 FSB As any shop owner knows, there are times when keeping the lights on is more difficult than usual – sometimes literally. Cast your mind back to summer 2022, and the story dominating the business headlines was the dizzying rise in energy prices leading to electricity and gas bills rising by three-, four- or five-fold – or even higher, for some unlucky small firms. The spike in prices, prompted by Russia’s illegal invasion of Ukraine, caused huge pain for many retailers, and although prices have thankfully receded from the heights seen two summers ago, the energy crisis has left scars on the small business landscape. As a result of soaring bills, many small shops did everything they could to reduce energy usage – turning off lights, adjusting opening hours, keeping air conditioning units switched off, and much more. All of this helped to trim bills – but there is one aspect of an energy bill which is static no matter how much usage fluctuates, and that is the standing charge. Day in, day out, all energy customers must pay a daily fee to their energy provider, to fund network infrastructure, operating costs, and policy costs for schemes such as the Warm Home Discount. Fair enough – in principle, at least. However, at the Federation of Small Businesses (FSB) we have been contacted by a number of small firms who tell us that the standing charge they pay is far higher than it was a couple of years ago, with no explanation from their energy provider as to why the extra cost is justified. One small firm whose owner got in touch with FSB reported an increase in the business’s daily standing charge from 70.94p per day in 2021 to 969.64p per day – over 13 times higher. The issue worried us enough that we wrote to Ofgem, with our letter calling on the energy sector regulator to recognise the “specific, negative impact standing charges are having on small firms” and calling for an investigation. Small businesses based in rural areas – such as gift shops on village high streets – have been disproportionately affected by standing charge increases, exacerbating the existing ruralurban divide and undermining “efforts to level up more remote parts of the UK”, as our letter pointed out. In the relationship between an energy company and a small shop, it’s pretty obvious that there’s an imbalance of power, especially since many of the protections rightly available to households do not extend to small firms, even though they behave in a way more akin to consumers than big businesses. Individual shop owners lack the resources, the expertise and the buying power necessary to get the best possible deal out of their energy suppliers, and could be forgiven for suspecting that they have been seen as something of a soft target for price hikes in their standing charges. To help ensure that high street shops, and small businesses of all kinds, can keep the lights on, we will continue to engage with Ofgem, in order to get the best possible protections in place for independent traders in every part of the UK. We’re very keen to hear what Ofgem’s next steps in this area will be, to ensure that small firms pay standing charges that are fair and transparent, no matter where they’re based. Tina McKenzie, Policy Chair, Federation of Small Businesses (FSB), looks at why standing charges are a headache for small businesses STANDING CHARGES ABOUT FSB As the UK’s business support group, FSB is the voice of the UK’s small businesses and the self-employed. Established over 40 years ago to help its members succeed in business, FSB is a non-profit making and non-party political organisation that’s led by its members, for its members. As the UK’s leading business campaigner, FSB is focused on delivering change which supports smaller businesses to grow and succeed. FSB offers members a wide range of vital business services, including access to finance, business banking, legal advice and support along with a powerful voice in Government. Each year FSB also runs the UK’s Celebrating Small Business Awards. More information is available at www.fsb.org.uk. You can follow us on twitter @fsb_policy and on Instagram @fsb_uk.
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