UK Small Businesses May Struggle With End of Energy Relief

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UK Small Business Energy Relief (Credit: Pixabay)

With an ongoing energy crunch taking place in Europe, small businesses in the United Kingdom say they depend on continued government support from the Energy Bill Relief Scheme and that their operations could be in jeopardy if the program is ended.

A survey of companies by FSB, the National Federation of Self-Employed and Small Businesses, shows nearly a quarter plan to close, downsize, or significantly change their business models if the UK reduces energy support when the program ends as scheduled in April 2023. Approximately half of the businesses say they will raise prices if the Energy Bill Relief Scheme (EBRS) ends.

The FSB energy survey shows the food industry will be the most impacted if the EBRS ends, with 42% of those businesses saying they will have to close or radically change their operations. Retail followed with 34% saying that they will face those consequences if the relief ends, and 29% in the manufacturing sector responded that way.

The EBRS began in October 2022 and provides energy discounts for businesses, volunteer organizations, and public operations such as schools and hospitals. It comes at a time when Europe is facing high energy prices, especially from high gas prices resulting from the war in Ukraine. That has led to significant energy conservation measures across the continent, and market volatility has the energy industry rethinking strategies across the globe.

A majority of the UK businesses (63%) say their energy prices have increased in 2022, with 44% saying their energy costs at least doubled. One in five of the businesses say their energy costs have tripled this year.

To cope with the potential end of the relief program, 44% of the small businesses say they will raise their prices, although 18% say they will keep their prices the same in consideration of their customers. A third of the businesses say they will cancel or scale down their investments.

As a result of the survey, FSB is encouraging the UK government to continue the program beyond its scheduled conclusion. It also wants the government to consider the size of a company, and not just the sector or geography, when determining which businesses are vulnerable to the energy crunch.

FSB also says the UK should help small businesses invest in energy efficiency with incentives and other programs. The survey results have been submitted to the Department for Business, Energy, and Industrial Strategy.

“It’s important that the government provide certainty to small firms for the long-term as they can’t plan on a six-month horizon,” says FSB National Chair Martin McTague. “Business size must be taken into account as a relevant factor in the government review of the EBRS, given the stark impact on small firms which have typically lower margins and are least able to deal with the rising costs. It can’t be a purely sector-based decision, otherwise it’ll lead to deadweight and unfairness.”

Environment + Energy Leader