Thousands of small businesses risk closure or “radical restructuring” after being trapped in crippling fixed energy tariffs, a lobby group has warned, calling on energy suppliers to cut tariffs for small struggling firms as wholesale prices fall.
The Federation of Small Businesses (FSB) has urged utility suppliers to allow small firms locked into fixed tariffs from last year to renegotiate contracts to better reflect today’s “significantly lower” wholesale energy prices.
The organisation’s plea comes a month after huge cuts to UK government support on energy bills for businesses. Since April 1, the Energy Bill Relief Scheme (EBRS) has been downgraded to the Energy Bills Discount Scheme, which “changes support to pennies that do not touch the sides of huge bills,” the FSB argues.
Hundreds of thousands of small businesses are trapped in sky-high energy contracts after fixing at the market peak.
FSB's latest research indicates that 13 per cent of small businesses fixed their energy bills between July and December last year, with a “significant” number of these operating in the food and retail sector. Of this group, 13 per cent say they could be forced to either close, downsize, or radically restructure their businesses, equating to 93,000 small firms across the UK.
According to the FSB study, a significant proportion of small firms stuck in fixed contracts are from the accommodation and food sector (28 per cent), and the wholesale and retail sector (20 per cent). Some four in ten (42 per cent) small firms that fixed energy contracts in the second half of last year say it has been impossible for them to pass on costs to consumers who had to tighten spending and they cannot afford further price increases amid the cost-of-living crisis.
The small business lobby group is calling on energy suppliers to allow these small firms to extend their fixed contracts but at a blended and lower rate - between their original fixed rate and the current, lower wholesale rate.
“Now, with that support largely disappearing, they are once again faced with massive energy bill hikes.”
McKenzie added that it was “disheartening” to see that companies could be forced “to close, downsize or radically re-structure” as a result.
“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.”
A security guard stands in the doorway of a store in the Oxford Street retail area on December 13, 2024 in London, EnglandPhoto by Leon Neal/Getty Images
The Amazon Fresh store in Ealing, LondonPhoto: Amazon
A woman browses some of the Christmas gift ideas in a store on December 13, 2024 in London, England. Photo by Leon Neal/Getty Images
