High street firms forced to pay energy suppliers millions up front

ENERGY suppliers are demanding millions of pounds up front from major high street firms as hefty deposits for gas and electricity bills risk triggering a business cash crunch.

A number of energy providers, including SSE and EDF, are asking some firms for huge deposits to cover months of bills amid fears that the crisis will cause swathes of small businesses to collapse. Businesses are not protected by the energy price cap and are typically on contracts that last a year or more. However, many firms are being refused quotes from suppliers and being told to cough up huge sums of money just as pressure on their finances rises. As energy prices soar, the size of the deposit demanded by suppliers – often a share of their annual costs – also rises rapidly.

Kate Nicholls, head of Ukhospitality, said: “This is common as there is little trade credit insurance available to hospitality businesses because of the Covid challenges the sector faced and concerns about risk appetite. It means energy suppliers – and other suppliers – are asking for up-front deposits to secure supply and these are usually based on a quarter or a six-month bill.”

She said in some cases “millions of pounds for a high street chain or holiday park” was being demanded, delivering a major blow to companies’ finances. A business energy broker said some hotel chains were also being

forced to put up hundreds of thousands of pounds in advance to secure their energy supply. They said security deposits are typically 30pc of annual spend for the affected hospitality firms. The broker added: “The numbers are scary but I can understand to a degree why the suppliers are doing it. They have to be cautious to survive.”

Many business energy contracts are renewed in October, meaning sectors face a major crunch point on bills in the coming months.

The bosses of six of the UK’S biggest pub and brewing companies have today written to the Government warning many are at risk of closure within months amid price hikes of more than 300pc. Greene King, JW Lees, Carlsberg Marston’s, Admiral Taverns, Drake & Morgan and St Austell Brewery urged ministers to act to avoid “real and serious irreversible” damage to the sector.

An SSE spokesman said: “We credit check all business customers. Depending on the outcome, customers may be asked for a security deposit.”

An EDF spokesman said: “In some cases we will request a security deposit to permit a contract to be sold.”