‘Scaling back already-insufficient energy support will hit small businesses’

Thousands of small businesses are set to struggle when the “already insufficient” help they are getting with their energy bills is slashed less than three months from now.

Experts also warned that the move might put another dent in the UK’s efforts to meet its environmental goals, as firms are left without enough cash to invest in new technology.

Although business groups welcomed the certainty that the new 12-month support – announced on Monday – will give them, they questioned the level of support.

Michelle Ovens, founder of Small Business Britain, said: “Businesses were hoping to receive reassurance that post-March things would become more manageable, but it is hard to see how the latest announcement will do that.

“Small businesses therefore are rightly concerned that the already insufficient energy package is being rolled back significantly in just a couple of months’ time.”

The new plan will see companies getting a small deduction from their energy bill from the beginning of April.

According to an example on the Government’s website, it could mean that a pub which was previously getting £3,100 in support every month will now get just £190.

Energy experts at consultancy Cornwall Insight said the hospitality sector and some retailers could be especially vulnerable to the reduction.

“The thresholds set for support under the EBDS (Energy Bills Discount Scheme) versus the support previously offered mean businesses will have to take a lot more energy price pain before any medicine is administered,” said Cornwall Insight chief executive Gareth Miller.

“As a result, we already see the EBDS being poorly received by some businesses and their trade associations.”

One of those is UKHospitality.

The massive hit “will simply be unsustainable for many”, said the trade body’s boss, Kate Nicholls.

“With no further, dedicated support for a vulnerable sector like hospitality, I’d urge the Government to consider other measures it can take to help the sector,” she said.

Alexandra Hall-Chen, at the Institute of Directors, said the previous scheme, which ran from October last year, had removed a serious threat to the health of around a quarter of British companies.

“However, whilst many manufacturers will also receive additional support, it is a shame that the Government has not found a way to target other firms most exposed to volatile international energy markets, such as those in the hospitality sector,” she said.

“The design of the new scheme will also provide less certainty for businesses in budgeting.”

Mr Miller also said the lack of support could harm companies’ efforts to slash their carbon emissions.

“Aside from the impact on the financial integrity of businesses that will arise from the EBDS, the Government must also weigh up the constraints on capacity of the UK business sector to invest significantly in the decarbonisation of business and industry,” he said.

“Some larger and more financially resilient firms will still be able to continue their plans, but many may now be unable to create borrowing capacity or free cash flow, at least over the coming few years, whilst they face this cocktail of cost challenges.

“It’s not about the will, it’s about the means.”

Meanwhile, charities – which are also covered by the changes – are worried about their futures, said Neil Heslop, chief executive of the Charities Aid Foundation.

“More and more people are relying on charity services, but they are stretched beyond measure with inflation increasing their costs and donations falling,” he said.

“Their finances are on a knife-edge even with the existing scheme, so organisations are relying on their reserves to cover core costs or cutting back on services.

“Many charities are running out of options to continue to provide for the vulnerable in our communities.”