Responding to the end of Energy Bill Relief Scheme today, Tina McKenzie, Policy Chair of the Federation of Small Businesses (FSB) said:
“The cliff-edge we’ve been about warning for months is sadly here – tens of thousands of small firms are now at an existential risk as government energy support will largely downscale to a scheme that offers almost no help from tomorrow (Saturday).
“From cafes and pubs to salons and convenience stores, small firms that fixed their energy contracts last year will see their bills rise by three or even four-fold as prices revert back to high prices and to pre-Energy Bill Relief Scheme level.
“We found that 24% of small firms are trapped in fixed contracts, and of them, 28% say they could be forced to downsize, close or restructuring their businesses. This equates to 370,000 small businesses, and not to mention the jobs and communities which depend upon them.
“But there’s still time to cut the pain and pull these firms back from the cliff edge. By allowing small firms that are caught in fixed and high prices to renegotiate and ‘blend and extend’ their energy contracts will enable them to come out from the high fixed price with their energy suppliers and agree to a new fixed term contact that resembles the lower prices that we see at the moment.
“Added cost pressures can’t be easily absorbed by small firms which have little to no cash reserves, while customers can’t afford to have these price increase passed on in full.
“Giving small firms the option to blend and extend their fixed energy contracts could avoid unnecessary inflation. Let’s not forget these small businesses are the ones that pushed through Covid and the energy crisis in winter despite their very limited resources. These firms deserve a fighting chance this year.”
Notes to editors
1). Illustrative example on the level of support under the old and new energy support scheme
The following example of a pub is used by the Government in its Energy Bill Relief Scheme guidance.
A pub has an electricity consumption level of 48,000 kWh per year and a gas consumption level of 192,000 kWh per year.
If the pub placed a new contract for electricity on 22/08/2022 at 76.15 p/kWh (at the Market Reference Price set by the Government) paying now £36,552 per year for electricity (this is without any Government support).
On the same day, the pub placed a new contract for gas at 25.14p/kWh (at the Market Reference Price set by the Government) paying now £48,268 per year for gas.
For both electricity and gas, the pub now pays £84,820.
EBRS (which ran from 1 October 2022 to 31 March 2023)
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- EBRS delivered savings to that business of over £26,424 a year for electricity, resulting in an annual electricity bill of £10,128.
- EBRS also delivered savings of over £33,868 a year for gas, resulting in an annual gas bill of £14,400.
- The total discount for both gas and electricity amounted to £60,292 per year. The total bill is £24,528 per year.
EBDS (coming in on 1 April 2023)
- Under EBDS the annual discount will be reduced to £941 for electricity and £1,338 for gas, or £2,279 for both gas and electricity. The business’s bill for electricity will go back up to £35,610 a year and £46,929 for gas. £82,539 per year for both gas and electricity.
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About FSB
As the UK’s largest business support group, FSB is the voice of the UK’s small businesses and the self-employed. Established over 40 years ago to help its members succeed in business, FSB is a non-profit making and non-party political organisation that’s led by its members, for its members. As the UK’s leading business campaigner, FSB is focused on delivering change which supports smaller businesses to grow and succeed.
FSB offers members a wide range of vital business services, including access to finance, business banking, legal advice and support along with a powerful voice in Government. Each year FSB also runs the UK’s Celebrating Small Business Awards. More information is available at www.fsb.org.uk. You can follow us on twitter @fsb_policy and on Instagram @fsb_uk.