Ross McNally, Hampshire Chamber Chief Executive and Executive Chairman, has called for action following the announcement by Ofgem that the energy price cap will rise to £3,549 a year from October 1.
He said: “We cannot continue to have the wholesale market price for gas dictating all energy prices in the UK when that market can be hugely impacted by major one-off external factors such as the war in Ukraine. That link must be broken so global commodity markets do not set the price we pay for our North Sea gas, half of the total amount we consume.
“Government intervention is simply not supporting businesses at all. The latest data from the Federation of Small Businesses shows that 53 per cent of firms expect to stagnate, shrink or fold in the coming 12 months, due to unaffordable costs driven by record inflation and huge increases in utility bills – and that is only going to get worse.
“Smaller traders, who employ a total of 16 million people, do not benefit from the energy price cap, and there were a record 20,200 fewer businesses in the second quarter of this year. We are in a grievous situation.
“The price of gas is nine to eleven times higher than usual, with the cost of a therm rising from 60 pence to £5. That means the UK energy bill rising from £15 billion to £75 billion this year.
“The answer has to be radical thinking; wholesale changes are needed to allow UK energy prices to be set more correctly. It is a complex procedure as we also sell into international markets, but the wholesale rate is false right now having been weaponised.
“The short term answer may well be subsidies, with the Government intervening and absorbing the latest increase to freeze prices where they are now, estimated at £40 billion for this winter – but in reality this just reinforces the weaponised market rate and cap calculation.
“In the long term we must focus more on growing domestic energy production and supply, including cheap renewables, and separate our production from global energy prices. Energy supply is a national security need and the new Prime Minister must make it the number one priority.”