The end of the Energy Bill Relief Scheme in seven days could threaten the future of hundreds of thousands of small firms, according to research by the Federation of Small Businesses (FSB).
With help for energy bills due to be radically downscaled in a week’s time, FSB is warning that 370,000 small businesses who fixed their energy bills last year may need to shrink, restructure or close when their bills revert to a higher price on the 1st of April.
The new scheme kicking in on that day, the Energy Bills Discount Scheme, offers a far lower level of support for small businesses. While market prices have stabilised for those fixing their contracts now, or who are 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.
Many small businesses told FSB that their energy bills had soared three, four, five-fold or even more between 2021 and 2022 – driving a coach and horses through their budgets and in many cases making it unviable for them to remain open without the help provided by the EBRS.
FSB finds that around 24% of small businesses are locked into energy contracts that were signed last year, at a time when wholesale prices were soaring, and over a quarter of this group (28%) could have to downsize, rethink their business model, or even close when they are hit by the rise in energy costs.
It is worth noting that many of the smallest businesses trading on marketplaces won’t be impacted if they are working from home as they’ll be on domestic energy bills. But even here, they will have seen their bills skyrocket over the past year and are facing similar challenges, especially those who have high energy uses to run equipment.
In the short term, FSB is calling on energy companies to be sympathetic to the plight of small firms in this position, and to allow them to renegotiate or ‘blend and extend’ their energy contracts, to benefit from the significantly lower wholesale energy prices which are now available.
In the longer term, the FSB want small firms’ progress towards net zero to be supported by the Government through the introduction of 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.
This would reduce small firms’ carbon footprints and their energy bills at the same time, giving a huge boost to the UK’s net zero journey.
The jump in energy bills on April Fool’s Day won’t be a laughing matter but will be a shock to hundreds of thousands of small businesses, who signed up to fixed contracts when the government discount was guaranteed under EBRS.
In a week’s time with the rollback of government support, this group of vulnerable small firms will see their bills revert to high rates. This cliff-edge will also hit consumers as businesses will have to raise prices to cope with soaring bills, driving up inflation.
Some 370,000 small firms could also be forced to consider downsizing, restructuring or closing as it is impossible to pass on the full costs to customers…
…Our message to the Government is: show the small business community that they’re being treated as equal partner in this energy price crisis. That would keep 370,000 small firms off the cliff as well as the jobs and communities which depend upon them.– Tina McKenzie, Policy Chair of the Federation of Small Businesses (FSB)