Chancellor Jeremy Hunt has confirmed that he will announce proposals to reduce energy support for businesses next week, saying it was “unsustainably expensive”.
The chancellor has told business groups that a package providing support at a “lower level” than current measures would be available to them beyond March, promising to avoid a “cliff edge” in curtailing the subsidy.
In October 2022 the government introduced support for “non-domestic” energy customers, together with financial help for household gas and electricity bills. The scheme, which cuts the bills for organisations including businesses, hospitals, schools and charities, was due to end in March.
CAMRA chairman Nik Antona said:
“The prospect of energy bills massively increasing from April this year will be extremely worrying for hospitality businesses – particularly community pubs, social clubs and small breweries and cider producers that are vital for consumer choice and a thriving beer scene.
“The cost of goods and employing staff continues to rocket and customers are tightening their belts. Many businesses wonder how they will be able to turn a profit if energy bill support is halved.
“If this cut is announced next week, then the Chancellor’s Budget in March will need to provide extra support for hospitality businesses if we are to avoid the nation’s beloved pubs and breweries facing the threat of permanent closure.
“It will be vital that venues get more help with the burden of business rates – and for the new, lower rate of duty charged on draught beer and cider to be introduced as quickly as possible to help pubs and small, independent breweries compete with the likes of supermarket alcohol.”
Tina McKenzie, Policy Chair of the Federation of Small Businesses (FSB), said:
“Small firms are still very much in the dark on whether they’ll continue to be supported on energy bills when the current Energy Bill Relief Scheme (EBRS) expires in March.
“We made it clear in our meeting with the Chancellor today that we can’t afford a cliff-edge scenario that would see a raft of business failures. The Government must announce energy support plans as soon as soon as Parliament returns next Monday.
“With the current scheme ending in three months, it’s been impossible for small firms to plan their 2023. We’ve heard countless examples of small businesses on the brink of collapse because of sky-rocketing energy bills and the lack of assurance from the Government on energy support, from the bed and breakfast in the Lake District that has closed for the winter to bring down bills, to the fish and chip shop in the East Midlands which would fall into the VAT system, adding yet more cost, if it raises prices to cope with energy costs.
“Let’s not forget this energy price crisis affects all small businesses, which typically have lower margins and are least able to deal with cost pressures. That’s why we want to see an extension of the energy support scheme which takes into account the size of the business, rather than one focused on specific sectors. This will help restore hope and optimism and grow our economy, as the Prime Minister pledges today.”
Latest FSB research shows:
• One in four small firms anticipate that they will have to close, downsize or radically change their business model if the energy support dries up after March.
• Before the current support came in, around two thirds of small businesses had seen their energy costs increase compared to a year earlier, and one in five had their bills at least tripled.
• Nearly half (46%) have increased prices to partly cover the soaring bills, but most are struggling to pass on all of the costs in higher prices, at a time when their customers (whether consumers or other businesses) are also feeling the financial squeeze and having to tighten their belts.