370,000 small businesses at risk of downsizing and closures next month, warns industry group
Hundreds of thousands of small businesses are at risk of having to scale down their operations when support for energy bills is slashed next month, a leading industry group has warned.
The Federation of Small Businesses (FSB) has reported that 24 per cent of small businesses are locked into energy contracts signed last year, at a time when wholesale prices were soaring.
It fears over a quarter of this group (28 per cent) could have to shrink, restructure or close their businesses when the current support package concludes and the upcoming Energy Bills Discount Scheme (EBDS) kicks in next month.
Overall, this represents 370,000 small businesses across the UK.
While Chancellor Jeremy Hunt opted to extend the current support package for households by three months before shifting them on to the downgraded support scheme, he opted against a similar U-turn for business support.
The EBDS limits support to 70 per cent of energy usage and is capped at £5.5bn to avoid exposing the public to further costs in supporting businesses.
Gas prices have plummeted since December, but this won’t be reflected in long-term contracts until they are renewed later this year, leaving many businesses exposed to ultra-high bills.
While market prices have stabilised for those fixing their contracts now, or those on variable tariffs, those who fixed last year will see huge increases as they are locked into a high price before the government’s relief.
The industry body has calculated a pub using 48,000 kWh per year in electricity and 192,000 kWh in gas which signed a new contract in August last year would have received a reduction of £60,000 on its estimated £85,000 annual energy bill under the outgoing Energy Bills Relief Scheme (EBRS).
Under the incoming EBDS, it predicts that same business would only receive just over £2,000 in support, leaving it a bill to settle of nearly £83,000.
The FSB is now calling for small firms to be allowed to renegotiate or ‘blend and extend’ their energy contracts that were fixed last year, and for more support for businesses wanting to ramp up energy efficiency and progress towards net zero while driving down bills.
It is spearheading calls for a ‘Help to Green’ scheme, providing small businesses with a £5,000 voucher to invest in energy-saving or even energy-generating measures, such as better insulation, solar panels or a heat pump when cash balances are at rock bottom.
The Help to Green concept has been supported by a dozen other representative bodies, including British Chamber of Commerce, Institute of Directors and Make UK.
The FSB’s calls follow this week’s report from Npower Business Solutions which warned businesses feel they lack support to improve their energy efficiency.
The government has been approached for comment.