Alistair Arkley column

Feb 8 2006 By Alistair Arkley, The Journal

If there's one topic that's certain to come up whenever business people get together it's energy.

You only need to look at a few recent headlines in the North-East to understand why:

* Terra Nitrogen closing ammonia production at its Billingham plant because of high energy costs.

* Elementis Chromium closing half its plant at Eaglescliffe, blaming energy costs.

* Management at Cleveland Potash expressing concerns over spiralling energy costs at its Boulby Mine.

Of course not everyone loses out: witness Shell making the biggest ever profits by a UK listed company - £12.93bn, a third up on the previous year.

When it comes to the impact of energy costs, invariably the spotlight falls on the big companies.

However, the kind of stories which make the headlines are really just the tip of the iceberg and if you want the truth about how energy prices are affecting our economy, you could do worse than talk to the tenant of your local pub.

It is in many small businesses - and, of course, every pub is effectively a small business in itself - where the kind of doubling or trebling of energy bills we are seeing really bites home most directly.

You might wonder why. In a pub the cost of energy is surely a more marginal consideration than, say, a large chemical plant? Just remember the rule about every penny counting - take the example of a pub which may have an annual turnover of around £200,000. When costs of supplies, staff and maintenance are taken into account, that business might produce a profit of £20,000.

Consider then the impact on the viability of the business, if the annual energy bill rockets by as much as £5,000 - and that's the reality of what's happening now.

The Minister for Industry and the Regions at the DTI, Alun Michael, recently reassured North-East MPs that the Prime Minister's energy review could help in the long term but in the meantime they were taking "steps" to help industry remain competitive.

I suspect that, whether it be in the boardrooms of our large chemical companies or across the bar at your local pub, there will be a suspicion that, in reality, politicians find it more palatable to see business and industry shouldering the main burden of energy costs rather than the individual householder - and voter.