Small UK firms’ energy bills set to more than double due to Iran war | Small business

Thousands of independent businesses across the UK are bracing for their energy bills to more than double due to a sharp rise in heating oil costs, as the war in Iran pushes Europe’s fuel market prices to new record levels.

Approximately 7% of small and medium-sized companies heat their properties and provide hot water using heating oil; this rate has in some cases more than doubled in recent weeks.

Companies in rural areas are often not connected to the gas grid; This means they are more reliant on heating oil, a form of kerosene linked to the cost of jet fuel. It is used by approximately 17% of rural small and medium-sized businesses (SMEs), according to the Federation of Small Businesses (FSB).

The trade association has heard from members who have already begun rationing their fuel use to cope with the sharp rise in prices in recent weeks.

Anthony Jenkins, owner of a hotel and restaurant in North Yorkshire, said his heating oil supplier was charging 54.9p a liter in January, but was charging 129p a liter in late March.

“Many rural businesses, including ours, need to rely on heating oil, but the price increases are extraordinary. Our supplier refused to give us an exact price quote for over a week after we booked the delivery and told us the other day that this price would be 116% higher than before the crisis,” Jenkins said.

“We only charged half what we usually charge and asked our guests to help us cut costs by turning their radiators down rather than opening the window if the weather is too hot. They were all happy to help as they pay higher prices to fill up their cars, so they understand.”

As the days get longer and brighter, Jenkins said he hoped to rely more on solar heating for hot water to prevent the £3,000 annual heating oil bill from ballooning. “Luckily, we fixed our electricity contract a few days after the conflict started, but even then deals were disappearing from the market,” he said.

The FSB, which represents nearly 200,000 businesses and sole traders, has called on Britain’s competition watchdog to include the SME sector in its review of the heating oil market as a global energy supply shock fuels record high prices in Europe’s diesel and jet fuel wholesale markets.

Northwest European jet fuel and diesel prices jumped to all-time highs on Thursday, surpassing $1,900 (£1,434) and $1,600 per tonne respectively, as market participants braced for a further escalation of the conflict in the Middle East over the Easter long weekend, according to market intelligence firm Argus.

The trade association is also alert to signs that rogue energy brokers could take advantage of the market crisis to push smaller companies into signing long-term deals on bad terms.

Tina McKenzie, head of policy at the FSB, said: “Thousands of small businesses use a broker to find energy contracts, but this is an area where we think tougher rules are needed.”

Small companies do not benefit from the government’s cap on energy prices or other consumer protections offered to household energy customers, “despite being closer to households than their larger counterparts,” McKenzie said.

“Commercial energy customers are nervous and the situation is evolving rapidly, which means the conditions are ripe for fraudulent brokers to take advantage of customers’ stress and lack of information.”

While proposals have been put forward to strengthen the protection small businesses receive against rogue energy brokers, including closer scrutiny from energy industry regulator Ofgem, these will not come into force until new legislation is passed.

A spokesman for Ofgem said the regulator had written to non-domestic suppliers and brokers “to remind them to treat their customers fairly and prioritize transparent pricing and good consumer outcomes”.

“We understand that the volatility we are seeing in the market as a result of the conflict in the Middle East is concerning for businesses,” the spokesman said.

“We expect businesses, particularly smaller organisations, to be appropriately supported as they navigate challenging market conditions.”