Waiting game increases energy bill fears among small firms

Chancellor Jeremy Hunt on Wednesday (4 January) said he was planning to reduce energy cost support to businesses, schools, and charities.

The Federation of Small Businesses and the British Chambers of Commerce have urged the government to be more specific about its plans in regard to reducing the support to give businesses a chance to plan for their future.

The FSB has said the Chancellor’s announcement leaves small business on a “cliff-edge scenario”.

Tina McKenzie, policy chair of the Federation of Small Businesses (FSB), said small firms are still very much in the dark on whether they’ll continue to be supported on energy bills when the current Energy Bill Relief Scheme (EBRS) expires in March.

“We made it clear in our meeting with the Chancellor today that we can’t afford a cliff-edge scenario that would see a raft of business failures. The Government must announce energy support plans as soon as Parliament returns next Monday,” she said.

“With the current scheme ending in three months, it’s been impossible for small firms to plan their 2023. We’ve heard countless examples of small businesses on the brink of collapse because of sky-rocketing energy bills and the lack of assurance from the Government on energy support, from the bed and breakfast in the Lake District that has closed for the winter to bring down bills, to the fish and chip shop in the East Midlands which would fall into the VAT system, adding yet more cost, if it raises prices to cope with energy costs.

“Let’s not forget this energy price crisis affects all small businesses, which typically have lower margins and are least able to deal with cost pressures. That’s why we want to see an extension of the energy support scheme which takes into account the size of the business, rather than one focused on specific sectors. This will help restore hope and optimism and grow our economy, as the Prime Minister pledges today.”

The latest FSB research showed one in four small firms anticipate that they will have to close, downsize, or radically change their business model if the energy support dries up after March.

Before the current support came in, around two-thirds of small businesses had seen their energy costs increase compared to a year earlier, and one in five had their bills at least tripled.

Nearly half (46 per cent) have increased prices to partly cover the soaring bills, but most are struggling to pass on all of the costs in higher prices, at a time when their customers (whether consumers or other businesses) are also feeling the financial squeeze and having to tighten their belts.  

BCC director general, Shevaun Haviland, said businesses have been desperate to learn if support for their energy bills will be extended beyond the April cliff edge.

“An announcement in the coming days on the exact shape of the assistance cannot come soon enough for many, with thousands fearing closure if it is not extended,” she said.

“More than a third of firms have told us they are finding it difficult to pay their energy bills even when they are in receipt of Government support.

“Any continued help is welcome, but it is now clear the new plan will be at a lower level than the existing one. That’s unsurprising, given the state of public finances, but this will still have a significant impact on many businesses, in particular SMEs and energy-intensive firms.

“With little sign that energy prices are likely to substantially ease this year, the Government also needs to be thinking about the long-term solutions.

“There must be reform of the business energy market. It is crucial the Government increase Ofgem’s powers so it can play a role in protecting firms’ access to energy deals through greater regulation.

“It must also take action, including grants, green loans or tax breaks, to help firms become more energy efficient — to reduce the continued strain on their operating costs.

“We must not be sat around the table again in 12 months’ time. It is vital that an energy strategy is developed that promotes longer-term stability, removing the need for government support and setting up the UK as a global hub for green innovation.

“The time for listening is over, the Government must act now to give businesses confidence to invest, grow and power the much-needed recovery of our economy in the months ahead.”