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28 September 2012

Small firms could be left in the red by the Green Deal

Reference number: PR/2012/31

FSB News Release
PR 2012 31

Issue date: Friday 28 September 2012

Small firms could be left in the red by the Green Deal

Small firms could find very little benefit from the Green Deal, which officially opens on 1 October 2012, as potential cost savings are eaten by rising energy bills driven by a raft of forthcoming costly energy and environmental policies, according to a new report from the Federation of Small Businesses (FSB).

The report, Making sense of going green, looks at 12 environmental policies in the pipeline for small businesses. It argues that the Green Deal, which should help small firms reduce the cost of their energy bills through energy efficiency improvements, may not reach its full potential as the cost of low carbon policies and other new environmental regulations eat into those cost savings, meaning small firms cash-flow will be hit at a time they can ill afford it.

Small firms that choose to take out a Green Deal will face longer payback times than households. And, before any real savings are seen, they must repay the initial cost at what are likely to be commercial rates of interest. This means for many firms, it could take 20 or more years to see any benefit from carrying out the work. The FSB believes this is likely to put many firms off from taking out a Green Deal and benefitting from its cost saving potential.

The FSB''s report shows that an unprecedented number of costly energy and environmental policies are going to impact small businesses'' cash-flow in the next two years.   Reform of the electricity market is likely to increase small businesses'' energy bills by 34 per cent, and the implementation of the UK''s Carbon Price Floor will mean that UK businesses will be paying higher energy bills than their European counterparts.

Furthermore, research from the FSB has shown that 45 per cent of firms struggle with the cost of utilities. The report argues how the potential of the Green Deal to offset energy cost increases will be lost unless it is made more attractive for small businesses to take advantage of.

The FSB wants the Government to use Green Investment Bank finance to guarantee low levels of interest rates for small firms to encourage widespread take-up of the initiative.

John Walker, National Chairman, Federation of Small Businesses, said:

"The Green Deal is a good thing – small firms want to be greener and save money on their energy bills. Our fear is that the scheme''s potential to help insulate small firms from future energy cost increases will be lost due to the unattractiveness of the scheme for non-domestic users. It is imperative to help small firms'' cash-flow that the Government look at how it can guarantee low rates of interest for small businesses. 

"The reform of the electricity market and subsidies for other forms of low carbon generation mean that household and business energy bills are going to rise significantly in the coming years. Coupled with a raft of forthcoming environmental policies, the FSB is concerned that small firms will be disproportionately affected through continuing difficult economic times."

ENDS