As state bailouts go, the failed gas and electricity provider Bulb Energy is the largest since the £45.4bn Royal Bank of Scotland bailout of 2008. But something about this latest bailout is making many freelancers and small business owners very bitter indeed.
Bulb Energy has been paying millions in bonuses to retain staff since its £1.7bn government bailout in November, according to a Financial Times report. This arguably smacks of hypocrisy for those small business limited company directors that were denied COVID support.
While small business owners are struggling to pay energy bills and boost salaries in line with inflation, they are also expected to fund the Bulb Energy bailout to the tune £2m (so far), which includes the £250,000 salary of Hayden Wood, the company’s chief executive and founder.
The FT report, reiterated the fears of freelancer and small business owners that the costs will add to the burden on taxpayers of supplier collapses at a time when energy bills are soaring.
It has emerged at a parliamentary hearing last week that Labour MP Andy McDonald, a member of the House of Commons business select committee, asked MPs last week whether it was “morally justifiable” for taxpayers to be paying Wood’s salary, according to the FT.
The report also revealed that the payments, which are not in the employees’ contracts, are being “made to retain key staff”, mostly customer-facing people, to “continue critical operations and to support the attempts to sell the business,” said two people familiar with the matter.
If Bulb fails to find a buyer, then it shows just how bad the company’s financial health is because power assets are the darling of the infrastructure investment world. Why? Power assets often can pass inflationary costs back onto customers and as we have witnessed from the FT report, they can pass on employee bonuses and administration fees, too.
Who is going to foot Bulb’s M&A legal and financing fees? The taxpayers? Probably.
Centrica and Masdar were the only two of six companies who expressed an interest in Bulb to put forward non-binding bids, according to a Proactive Investors report.
Centrica’s offer though means taxpayers will potentially have to support the purchase.
There is going to come a time when customers, AKA taxpayers and small business owners left out in the cold at the heart of the pandemic, will say enough is enough. And that time is now.
Should “The Excluded” foot any part of the Bulb bailout?
Close to half of small firms do not expect to grow over the coming year amid a cost-of-doing-business crisis and widening sectoral optimism gap, according to the latest SBI from FSB.
An ONS survey of 9,000 businesses published last week shows just shy of one in seven businesses not currently fully trading. Close to one in three (29%) are having to pass on rising costs to customers, and one in ten (12%) have been directly impacted by supply chain disruption. If those owners are limited company directors they could have been among those that were excluded for COVID support.
Madd Alexander-Grout, Ceo of My VIP Rewards, an app that helps people to save up to on average £500 a year on their everyday living expenses, says the rising cost of living is “dismantling” many families and small businesses before our eyes.
“I would like to see Rishi Sunak announce more grants for the small businesses who have struggled all the way through the pandemic only to be met with this,” says Alexander-Grout.
“Small businesses only have so much fight left in them. We are seeing businesses close every day and more needs to be done by the Government to stop this.
“I am better than most people at saving money because of what I do for a living and because I was once £40,000 in debt. I finally managed to get myself debt-free within five years but even I’m struggling in the current climate.
“It’s an absolute nightmare out there at the moment. Luckily, because our business helps people with the rising cost of living, we are doing ok. But people are extremely cautious about spending now, and we help people to save money when they spend.”
A record-high 87% of small business owners state that operating costs are up compared to this time last year. The shares citing fuel (60%), utilities (58%), and taxation (27%) as contributors to that increase are also at record highs, following the hiking of national insurance rates and issuing of new business rates bills this month.
FSB National Chair Martin McTague said,
“The small business community shrank in size to the tune of hundreds of thousands over the pandemic. With Covid numbers now falling, this needs to be the summer where we start to reverse that trend – policymakers should be doing all they can to facilitate and encourage start-ups and side hustles.”
Amen to that, Martin.