Budget: 350,000 small firms at risk of ‘shrinking, restructure or closure’ unless energy bill help extended – FSB
Small firms have pleaded with chancellor Jeremy Hunt to extend business support for energy bills by three more months ahead of Wednesday’s much-vaunted spring budget.
A leading industry group had warned companies on fixed-term energy contracts are at risk of being exposed to ultra-high prices when the support package for businesses is slashed next month.
Martin McTague, national chair of the Federation of Small Businesses urged the Chancellor to allow businesses to agree new terms with suppliers or to extend the Energy Bills Relief Scheme for another three months – when wholesale costs are expected to drop significantly.
He told City A.M.: “Energy suppliers should implement a ‘blend and extend’ approach for this vulnerable group, allowing them to renegotiate their contracts and sign up for another 12 months, or the Government could simply extend the EBRS for another 3 months which we believe would be affordable now as market prices have fallen.”
Extending the support package for a further three months would be comparable to the expected U-turn from the government for household support – with Hunt widely anticipated to keep support at current levels for domestic users until the expect decline in bills in the second half of the year.
The EBRS subsidises bills at a rate of £211 per MWh for electricity and £75 per MWh for gas, but this support is expected to be scaled back when the package expires next month and replaced with the more frugal Energy Bills Discount Scheme.
This package is capped at £5.5bn and will only apply to 70 per cent of energy used by businesses, while also raising the threshold in energy costs for when support kicks in.
Can small firms survive the energy crisis?
McTague warned that this reduced level support could leave hundreds of thousands small businesses which signed up for fixed tariffs facing huge hikes in their energy bills without sufficient government support to keep them afloat.
He said: “The upcoming spring budget needs to look out for small firms who agreed fixed tariffs in the last year when prices were high, who will soon see their bills go up by as much as four-fold when the Energy Bill Relief Scheme closes at the end of this month.
“We estimate over 350,000, or 28 per cent of small businesses who signed fixed tariffs last year, could need to shrink, restructure or close if their bills revert to the higher rates in April.”
FSB is also pushing the Chancellor to provide more support to businesses looking to boost energy efficiency and slash emissions, with the government targeting a 15 per cent cut in energy use by the end of the decade and net zero carbon emissions by 2050.
The group has its own initiative – the “Help to Green Scheme” – backed by 11 other business bodies, that it wants Hunt to support with taxpayer funds.
“This would be in the form of a hub of information on how to cut energy use and emissions, alongside a £5,000 voucher for each firm to invest in energy reduction measures, such as installing heat pump, better insulation, and solar panels, when cash balances are at rock bottom,” he explained.
When approached for comment, a government spokesperson said: “The government has provided an unprecedented package of support, enabling some businesses to pay around half of predicted wholesale energy costs last winter, and we’ve pledged further energy support from April onwards through our Energy Bills Discount Scheme.
“Our UK Business Climate Hub provides businesses with a suite of tools for measuring, reducing and reporting on their emissions, and we’re also offering support for energy efficiency investments. This includes our £450m Boiler Upgrade Scheme, which is open to non-domestic buildings and provides grants of up to £6,000 towards the cost of installing a heat pump.