Tens of thousands of small companies are at risk of closing down due to being locked on to high energy bill contracts last summer, the Federation of Small Businesses (FSB) has warned.
The influential trade body is calling for energy suppliers to allow these companies to move to a lower rate.
When energy prices were at their highest last year, the Government encouraged businesses to sign up to fixed-term energy deals to benefit from the Government’s energy support scheme.
But when that support was ended after six months, and replaced with a much less generous scheme, that left companies locked into energy contracts fixed at the price of the day, their highest level.
“Many small businesses agreed to lock in energy contracts last year to ensure they qualified for the maximum level of Government support,” said the FSB policy chair Tina McKenzie.
“Now, with that support largely disappearing, they are once again faced with massive energy bill hikes as rates go back to pre-energy bill relief scheme level.”
The FSB estimates 13 per cent of its members signed on to fixed energy bills in the second half of last year. These rates are far higher than what the market is offering currently, and some businesses are simply finding it impossible to pay them.
Of those who signed on to fixed rates, one in 10 say they may have to close down, downsize or radically restructure their business in order to survive.
The latest ONS data from the Inter-Departmental Business Register shows that 105,300 UK businesses closed in the first quarter of 2023, a slight improvement on the same period a year before, but still the second-higher number of first-quarter closures in the ONS’s records. Accommodation and food services have seen the biggest uptick in closures, up 15 per cent on the previous year.
The FSB is calling for energy suppliers to allow these businesses to move to a new fixed plan, lower than their current rate but still above market price.
“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,” said Ms McKenzie. “We’d also like to see the Government and Ofgem support this initiative.”
High energy rates combined with the high cost of raw material, transport and staff wages are still causing disquiet, but business confidence has been rising ahead of the summer.
“There are signs that small businesses may be about to turn a corner after last year’s downturn,” Ms MacKenzie said. “Giving small firms a way out of last year’s market peak rates will accelerate the progress to recovery.”
Tens of thousands of small companies are at risk of closing down due to being locked on to high energy bill contracts last summer, warns the Federation of Small Businesses (FSB).
The influential trade body is calling for energy suppliers to allow these companies to move to a lower rate.
When energy prices were at their highest last year, the Government encouraged businesses to sign up to fixed-term energy deals, in order to benefit from the Government’s energy support scheme.
But when that support was ended after six months, and replaced with a much less generous scheme, that left companies locked into energy contracts fixed at the price of the day, their highest level.
“Many small businesses agreed to lock in energy contracts last year to ensure they qualified for the maximum level of Government support,” said the FSB policy chair Tina McKenzie.
“Now, with that support largely disappearing, they are once again faced with massive energy bill hikes as rates go back to pre-energy bill relief scheme level.”
The FSB estimates 13 per cent of its members signed on to fixed energy bills in the second half of last year. These rates are far higher than what the market is offering today, and for some businesses are simply impossible to pay.
Of those who signed on to fixed rates, one in 10 say they may have to close down, downsize or radically restructure their business in order to survive.
The latest ONS data from the Inter-Departmental Business Register shows that 105,300 UK businesses closed in the first quarter of 2023, a slight improvement on the same period a year before but still the second-higher number of first-quarter closures in the ONS’ records. Accommodation and food services have seen the biggest uptick in closures, up 15 per cent on a year prior.
The FSB is calling for energy suppliers to allow these businesses to move to a new fixed plan, lower than their current rate but still above market price.
“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,” said Ms McKenzie. “We’d also like to see the Government and Ofgem support this initiative.”
High energy rates combined with the high cost of raw material, transport and staff wages are still causing disquiet, but business confidence has been rising before the summer.
“There are signs that small businesses may be about to turn a corner after last year’s downturn,” Ms MacKenzie said. “Giving small firms a way out of last year’s market peak rates will accelerate the progress to recovery.”