High energy bills keep fuelling the cost of doing business crisis

Blogs 26 Sep 2023

We're continuing to support our members and the small business community during the cost of doing business crisis, including those stuck with high energy bills.

Gas ring with a blue flame

At the Federation of Small Businesses, backing small businesses on what matters most has always been at the heart of what we do – and this is more important than ever as you continue to face heightened energy bills amid the ongoing cost of doing business crisis. Find out the latest on our energy costs campaigning and the change we’re calling for to help small businesses survive these challenging times.

You can also find energy advice for small businesses from the Government and Ofgem

If you find that you cannot afford to pay your energy bill, contact your supplier as soon as you can to discuss your options. You can also get help from Citizens Advice or Advice Direct Scotland. Microbusinesses also have the right to complain to the Energy Ombudsman about their supplier if they can't get to an agreement with their supplier (once they have received a letter of deadlock and aren't happy with the decision, or didn't get a decision letter or letter of deadlock within 8 weeks).

You can get advice on energy efficiency from FSB's guide to energy management plans, or from the Business Climate Hub.

We’re calling for allowing small firms to renegotiate their fixed energy contracts that were agreed in 2022

Since 1 April 2023, the Government has largely downscaled its energy support for small firms that are on fixed price contracts agreed on or after 1 December 2021, as well as on deemed/out-of-contract or variable tariffs or similar contracts. The rebate is now provided through the Energy Bills Discount Scheme, which will run for 12 months and until 31 March 2024. This new scheme offers much less support than the previous Energy Bill Discount Scheme, which came to an end on 31 March 2023. FSB has expressed disappointment by the support cuts.

We’ve written to suppliers, the Government and Ofgem to allow small businesses who signed up to high fixed energy prices in 2022 to renegotiate and ‘blend and extend’ their contacts, meaning they can come out from the high fixed rates with their energy suppliers and agree to a new fixed term contract based on the lower prices that we see at the moment.

Ofgem has backed our call, and a significant number of energy suppliers have adopted our ‘blend and extend’ proposals. However, we are aware that some businesses are excluded from the renegotiation because they secured contracts through a third-party broker. We are calling on suppliers to offer blend and extend options to all small businesses, regardless of whether they went direct or via a broker.

Ofgem has published a best practice guide for energy suppliers and consumers to offer more transparency around security deposits – a guide which we contributed to.

Ofgem has responded to our calls and is investigating “deemed rates”, which apply when no contract has been set up, and is looking at expanding access to the Energy Ombudsman. Meanwhile, the UK Government is reviewing regulation of third party intermediaries (i.e. energy brokers).

FSB research found that 13% of small firms fixed their energy contracts during market peak in 2022.

With the downscaled government support, these small firms saw their energy bills revert back to last year’s peak levels, meaning three or four times what they were paying when the more generous government support scheme was in place.

FSB Policy Chair Tina McKenzie said: “The least energy suppliers should do is to allow small businesses who signed up to fixed tariffs last year to ‘blend and extend’ their energy contracts, so that their bills are closer to current market rates.

“There are signs that small businesses may be about to turn a corner after last year’s downturn. Giving small firms a way out of last year’s market peak rates will accelerate the progress to recovery.”

In January 2023, FSB Policy Chair Tina McKenzie gave evidence on the impact of soaring energy prices on small businesses to the BEIS Select Committee.

FSB has successfully lobbied the Government to provide small firms with funding for green improvements, alongside advice to reduce energy use, in the form of a pilot under its Powering Up Britain Strategy. We expect to see the pilot launched soon. We would like to see this be scaled up to a national-wide programme as part of our ‘Help to Green’ proposal, which has been backed by a dozen of trade associations and adopted in former Energy Minister Chris Skidmore’s Review of Net Zero.

Recent press releases 

3 August 2023: FSB's blend and extend call adopted by Ofgem
9 May 2023: Our call to energy suppliers to allow fixed contract renegotiations
31 March 2023: Our response to the end of Energy Bill Relief Scheme
30 March 2023: Our response to the Powering Up Britain Strategy

Report: Helping small businesses through the energy crisis

Small businesses face eye-watering energy price hikes with the cost of gas and electricity skyrocketing since 2021. Our recent report, Out in the Cold, found that the overwhelming majority (96%) of small firms are concerned about rising energy bills. Nearly two-thirds (63%) of small firms say their energy costs have increased compared to last year

The price of power has become a top concern for the small business community. The continued high level of energy prices significantly impacts the cost of doing business, especially for firms operating in sectors that require considerable amounts of energy, such as manufacturing and food services.

How the UK generates, distributes, and uses energy is expected to change drastically. To deliver this change, the UK Government must balance security, affordability, and sustainability. As a country, we must now make difficult decisions about how and where to invest in our energy infrastructure while ensuring we support small businesses through this energy crisis.

Read the report here.

We think that energy suppliers should treat small business customers fairly and with due consideration

We wrote to energy suppliers in late 2022 to urge them to:

  • Commit to freeze standing charges for small business customers
  • Ban requests for disproportionate upfront payments
  • Pledge not to disconnect any small business customers who fall into arrears and if they’re unable to pay bills after 30 days
  • Introduce a ‘time to pay’ arrangement to help their customers pay arrears over a longer time frame, learning lessons from HMRC and others.