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The Federation of Small Businesses (FSB) has expressed deep concern regarding the profits being recorded by providers such as Centrica, Shell and BP while at the same time lamenting the impact of increases in the price of energy and fuel on its members.

A third of FSB members work from home and are likely to suffer as much as domestic consumers from rising electricity and gas bills, while the price of fuel is a concern for all small businesses.

The FSB is urging the government to intervene where possible through the introduction of an automatic adjustor mechanism, whereby extra tax revenues from higher than predicted oil prices would automatically trigger corresponding reductions in fuel duty.

John Wright, FSB National Chairman said, “I am extremely concerned at the 35 per cent increase in prices from British Gas. This seems totally unfair when they made almost £1bn profit in the first half of this year. Obviously this increase will have an effect on small businesses that will either have to pass this on their customers or alternatively limit their expansion this year."

Wright also said it is alarming to learn that while thousands of our members are suffering, some of these companies are reaching record profits. "These are exceptional times and everyone should make sacrifices, including the petrol and gas companies. We would urge these companies to keep prices down as much as possible and to react to lower international oil prices as quickly as possible,” says Wright.

Customers could be taking action

It has meanwhile been reported that customers of British Gas may be voting with their feet.

One of the UK's largest loyalty networks has reported seeing more people switching utility providers in the past two days than they did in the previous three months.

Froggybank.co.uk says that since British Gas announced it would hike prices by 35% last Wednesday utilities have become the top selling category in the network - for the first time ever.

The of announcement of profits of just under £1b and the resulting media storm will not do British Gas any favours when it comes to retaining customer loyalty.

Competing utility companies have jumped at the chance to gain more customers with Scottish Power increasing its cashback deal to customers by up to £72.

NPower has included up to £100 cashback from NPower Business, plus cash from comparison sites Switch with Which and Energy Helpline.

Brutal response

Marketing manager at Froggybank, Nadeem Azam says, "we've never seen a rush of business like this, and certainly not for utilities. The response to the announcement has been swift and brutal."

"This is the largest number of people switching utility providers in just two days since we started the froggybank network four years ago. We expect the switching to continue for some time," says Azam.

Fightback

British Gas immediately launched an advertising campaign on the back of its price hikes offering customers the opportunity to fix their prices until 2011.

The company says this is possible due them having secured long term energy supplies at fixed prices.

Inflation fears

Some commentators have focused on how the British Gas announcement will add to inflation fears at the Bank of England who are set to meet this week to review interest rates.

There is speculation that the rising cost of living that the gas increases will invariably bring will offer the Monetary Policy Committee(MPC) the perfect excuse to make a strong decision and raise rates.