The current cost of living crisis, principally involving the rise in energy bills has meant that workers are now facing added expenditures. What, if anything, does this mean for employers and staff?
Rise in energy bills
There are many causes for the rise in fuel prices, including
- A long winter last year, coupled with poor wind and solar output this year
- Gas from Norway, Qatar and Russia is more expensive due to Russia restricting supplies and raising prices as retribution for Western countries’ support for Ukraine. This has resulted in stockpiling, which has in turn led to higher demand.
- The Asian market buying up huge quantities of LNG to transition their reliance away from coal towards gas.
The Energy Saving Trust also reports that the UK is reeling from the aftermath of the pandemic.
For these reasons, homeowners are seeing a sharp surge in their energy bills. In the early months of 2022, the UK energy regulator Ofgem, reported a record increase in global gas prices. The government body has announced that the price cap will increase by a further 80% starting from October 2022; alarming news for low-income households.
What does this mean for employers?
Remote working may lose its popularity as the cost of heating homes increases, leading to employees asking to come back to the office with its communal heating.
However, those who live in well-insulated houses may continue to work from home without facing fears of receiving an energy bill that is too high.
Employers may also face the burden of the energy crisis as they may greater fuel costs and demands for higher wages. Their inability to accommodate the requests of their employees could also lead to further industrial action. With tensions at an all-time high, can the government risk additional strikes?
Small businesses will feel these demands most greatly. We think that the UK could therefore see a potential increase in business closures.
What calls for action have been made thus far?
With the recent election of Liz Truss as Prime Minister, the government is facing pressure to tackle the energy crisis.
Calls for reform have been made by the NEA (National Energy Action) to increase financial support for low-income families. Other recommendations include creating payment matching schemes (a method where the government matches every pound the household makes to their utility debt repayments) to help low-income households clear their utility debts. The Federation of Small Businesses has asked the government to intervene to it a stop to the ‘sky high’ prices for energy bills. They seek to get the VAT rate reduced from 20% to 5%.
On 8 September 2022, the government shared their plans to freeze energy bills at £2,500 a year for the average household. It hopes that this strategy will save a typical household £1,000 per year and boost economic growth.
Conclusion
With winter nearing, householders must battle the cold weather and high energy costs. Whilst the government has made attempts to solve the energy crisis, the level of support it will provide to homeowners is unclear. The implications for UK employers could include strikes, more office-based working and business closures.
Both employers and home-owners will be facing the harsh realities of winter this year.
Image used under CC courtesy of Alexey Kljatov