Government announces support to tackle high energy bills for small businesses – industry reaction

New Prime Minister Liz Truss has announced that businesses will get help with their energy bill with prices capped for six months.

Responding to the announcement, National Chair of the Federation of Small Businesses (FSB) Martin McTague said “It’s a huge relief for millions of small businesses to hear confirmation they will be part of the Government’s plans to help on energy. Many have been pushed to the brink by crippling energy bills, and so it is welcome that help is on the way.”

“The toxic combination of uncapped energy hikes, high taxes, inflation and negative growth have become an existential threat for many. FSB is proud to have played our part in championing small businesses’ plight and pitching in ideas to the new team in power, and so we have contributed to today’s intervention.”

“Constricting the scale of energy bills for small businesses is unprecedented; we now have a high-level commitment in principle to help businesses get through the winter intact. Done right, this will be a lifeline – protecting jobs, communities and future economic recovery.

“However, the announcement is very high-level and sparse on detail so we will be working with the new Government to clarify what happens next. Small businesses’ instant reaction is that this is not enough information, yet, for them to plan.”

“Today’s statement appears to leave a number of questions unanswered, including:

• What will be the fixed unit prices (and standing charges) from October 1?
• What practically will now change – will energy retailers suspend high quotes and contract offers and recalculate from October 1?
• Will those who have accepted hugely increased bills in recent weeks be able to renegotiate to bring their bills down to reasonable levels?
• As a small business normally gets quoted for at least 12 months, does that new quote include 6 months at a low rate and 6 months at a high uncapped rate?  How does the energy retailer know who to quote extra support to, for the 2nd six-month period?

“This must not result in a cliff-edge after six months, with the withdrawal of support to all but ‘vulnerable’ targeted industries, sectors or types of business. The definition of who falls in and out of that support will need to be looked at carefully at the three-month review.”

“Our work on vulnerability of small businesses to energy costs has revealed huge bills causing damage in virtually any sector that uses energy in any meaningful way, just like most households. Any future definition of ‘vulnerable industries’ will need to be broad, realistic and fair.”

“The Government should also make good on its commitment for comprehensive help for all small businesses affected. If any have energy circumstances such that, in practice, they turn out not be covered by the measures announced today, the Government must keep an open mind and ensure policy decisions do not create another group of disenfranchised or excluded small businesses without support, just like it did on income support during COVID.”

Manwhile, Jonathan Geldart, Director General of the Institute of Directors, said “Businesses will welcome this pragmatic intervention which will help firms struggling with eye-watering energy costs plan for the future with greater certainty.”

“It is particularly encouraging that the intervention will of itself put downwards pressure on consumer price inflation, which has been top of the business worry list for the best part of a year.”

“We also welcome the reiteration of the government’s commitment to achieving our net zero targets, as well as a long-term review of energy regulation to fix underlying problems, the ambition to become a net exporter of energy by 2040, and pricing renewable energy through contracts for differences rather than at the marginal cost.”

“What we need now is an external reassurance that the scale of the intervention does not jeopardise the public finances. That’s why it’s crucially important that the Office of Budget Responsibility can swiftly produce its independent assessment of the impact on government debt and the wider macroeconomy.”

“We also want to see greater support for smaller businesses trying to accelerate their own path to net zero. We would hope that the anticipated policy work on how our climate targets can be achieved in a ‘pro-growth’ way, as the Prime Minister announced, can include such an assessment as a priority.

Ed Rimmer, CEO of SME finance provider Time Finance said “The fact that the exact details about company energy bills are yet to be outlined aves many businesses in the lurch. Ultimately, this makes forecasting business plans impossible. The damage caused by this ongoing economic stretch is already in effect, with many businesses’ financial challenges now rising to unmanageable levels. Businesses now need a clear and direct approach to the energy crisis so they can plan their finances for the challenging winter ahead.”

Whilsy, Douglas Grant, Group CEO at Manx Financial Group said “Today’s announcement on support for SMEs with energy costs is good news for UK business and shows that the government are taking urgent warnings from a variety of organisations seriously. We do however believe that more needs to be done. Our research recently revealed that 22% of UK SMEs that needed external finance and/or capital over the last couple of years, were unable to access it. Indeed more than a quarter have had to stop or pause an area of their business because of a lack of finance. SMEs continue to struggle with accessing finance and that worryingly, this lack of availability is costing them and the UK economy in terms of growth at a time when it is needed the most. The amount of growth that is being sacrificed is significant and will require new solutions which are designed to address this funding gap.”

“The extension of Recovery Loan Scheme (“RLS Phase 3”) was encouraging for UK business. RLS, which Conister was accredited for in August last year, has provided the necessary catalyst that many sectors required to thrive. As demand for working capital soars to new highs, more businesses desperately require liquidity provisions to counteract record inflation levels, rising interest rates, supply chain issues and increases in wages. With the cost of borrowing set to increase, many SMEs are facing their own cost of living crisis.”

“For some time, we have been calling for a sector focused permanent government-backed loan scheme which brings together both traditional and alternative lenders to guarantee the future of our SMEs. As the government looks for other ways to power the economy’s resurgence, the importance of a permanent scheme cannot be understated, it could act as the fundamental difference between make or break for many companies, and in turn, our economy. We very much hope this is something that becomes a reality.”

Shevaun Haviland, Director General of the British Chambers of Commerce said “The BCC welcomes this quick and positive intervention from Government. It is clear the new Prime Minister has listened to firms and is providing a strong package of support for business, equivalent to the crucial support to consumers.”

“We welcome the breadth of the offer to all non-domestic energy users with businesses, charities and public sector organisations all to be included.”

“The price cap is a measure the BCC has previously called for. It will give businesses some financial certainty on the outlook for the next six months. It is crucial that there is a review at three months so there is time to plan for the end of the six-month period.”

“However, given the other challenges still facing business on labour shortages, supply chain disruption, and rising raw material costs, it is unlikely that we will see greater investment from business in the short term.”

“If we are to truly revitalise our economy for the difficult months ahead then there must be a clear long-term plan that gives business the confidence to grow.”