NEARLY half of businesses will raise prices ahead of Christmas - amidst rising energy costs and fears of power outages to heap further misery on hard-pressed households.

A new study of 500 medium-sized businesses by accountancy and business advisory firm accountancy and business advisory firm BDO has revealed that to manage inflationary pressures, a quarter (25%) of firms are already increasing the price of goods and services for customers.

And looking ahead to Christmas trading, nearly half (46%) plan to raise or further increase the cost of goods or services in the next three months.

It comes as new figures show that the number of UK households in arrears on their energy bills soared to record levels in the second quarter of this year, with more than two million behind on their electricity payments.

Data from the energy regulator Ofgem shows that at the end of June, 2,347,511 households were behind on their electricity bills and 1,858,585 on their gas bills. Both totals rose by about a quarter in just three months, and by almost two-thirds since the end of 2020.

The news comes days after Jeremy Hunt, the chancellor, announced that the cap on energy unit costs would last only six months instead of the planned two years. Mr Hunt said a targeted scheme would replace it from April, but provided few details.

And new research from Green Flag reveals nearly three in four motorists have changed their driving habits due to the cost-of-living crisis with over 12 million drivers letting their fuel tank get as close to empty as possible before filling up.

The Herald: Jeremy Hunt leaves 10 Downing Street in London after he was appointed Chancellor of the Exchequer following the resignation of Kwasi Kwarteng. Picture date: Friday October 14, 2022.

The 'red line runners’ are drivers who let their fuel tank get as close to empty as possible before filling up, with 31% of drivers now more likely to do this due to the current cost-of-living crisis.

Green Flag warned that driving a car regularly with low levels of petrol or diesel can cause damage to a vehicle, as debris in the fuel tank can clog the fuel pump or filter. There is also the risk of suddenly having no fuel on a busy road or be stranded in a remote location.

Nearly three in 10 drivers (28 per cent), some 11 million people, admit their vehicle has run out of fuel before, rising to over half (55 per cent) of 18–34-year-olds.

The BDO study said that businesses are now demanding the next Prime Minister offers financial help to ease a crisis they say is worse than the Covid pandemic and financial crisis of 2008.

The spectre of even higher pre-Christmas prices comes as their research showed that rising energy costs and fears of power outages were the top concern for nearly half (43%) of businesses this autumn and winter.

A fifth say the energy and cost of living crisis has or will be more challenging to them than the Covid-19 pandemic, Brexit or the 2008 financial crisis.

The research also reveals that supply chain disruption is a top concern for one in four over autumn and winter with mounting inflation a top concern for almost a quarter (23%) of firms.

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A fifth (21%) say rising interest rates and the cost of borrowing are one of the biggest threats they face over the coming months.

And despite speculation that there will be a further rise to interest rates in November, businesses are increasing the amount of debt they take on as inflation drives up costs across their supply chains.

Some 18% are increasing their borrowing, while one-fifth (20%) of firms are taking on new debt or overdraft facilities.

Faced with this tough economic environment, businesses said further support was needed from the next Prime Minister to deal with the rising cost of energy, as nearly half (45%) believe the Government is not doing enough to address increases in energy bills.

Ed Dwan, partner at BDO said: “Businesses are facing an exceptionally difficult operating environment with costs rising across the board, ongoing supply chain disruption in the lead up to Christmas and an uncertain geopolitical climate.

“With a leadership contest for the new Prime Minister now underway, businesses are calling out for certainty and the right support ahead of a tough winter. These businesses are the engine of the UK economy and the pressure is on Government to provide the interventions that firms need to drive their growth.”

Meanwhile energy companies have warned MPs that the proposed new ‘windfall tax’ on energy firms which will help pay for fuel bill cuts will have “catastrophic consequences” for investment in green technology such as wind and solar.

Energy UK, the industry trade association that represents companies such as Glasgow-based ScottishPower and Perth-based SSE has registered its concerns on legislation put forward by Liz Truss’s government before she stepped down as prime minister that puts a ceiling on what wind farms and nuclear power plants earn to keep household energy bills down.

The tax formed part of the Energy Prices Bill which also put into law ministers' promises to cap dual fuel bills to an average of £2,500 for the next two years.

It is feared the 'windfall tax' is even more punitive than that imposed in May on the UK oil and gas sector, and described as a 25% Energy Profits Levy.

Energy UK has sent a briefing to all MPs ahead of chancellor Jeremy Hunt’s fiscal statement, expected on October 31, warning that the cap, as it is currently designed, would “cement a tax regime heavily tipped in favour of oil and gas, and send a disastrous message [to global investors] about the UK’s climate commitment”.

They warn the cap will limit its members’ profit opportunities, which is potentially even more damaging than the levy imposed on the oil and gas sector.