Written by Daniel Latto in Marketing, Money, News

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February 11, 2023

According to industry figures, thousands of small businesses face bankruptcy as the government reduces Business energy subsidies.

Chancellor Jeremy Hunt revealed a brand-new business energy discount scheme that will run until March 31, 2024.

The taxpayer is currently subsidising energy bills at a cost of £18 billion by capping gas and electricity prices at £75 and £211 per megawatt hour, respectively, until the end of March.

"

"Of course this ensures the energy companies still make enough profit, so phew, at least they're protected and the shareholders of those companies making record breaking profits can still gain.

Meanwhile, for tens of thousands of small businesses, life is going to get much harder than it already is."


Daniel Latto  Digital Marketing Agency Owner


Shutting down: Industry figures alert that many small businesses will close only when energy subsidies are phased out.

Businesses will receive a unit discount of up to £6.97 per megawatt hour for gas and up to £19.61/MWh for electricity beginning April 1, 2023.

According to the government, a typical restaurant or pub can expect a discount of up to £2,300 over 12 months, and a small place can expect a discount of up to £400 off their annual energy bill.

Businesses with relatively high levels of electricity use and trade intensity, such as metals, ceramic materials, and food production, will receive more assistance.

But nevertheless, industry leaders have reacted angrily to the flat rate per unit rebate, which is six times less generous than the current assistance, warning that it will not be enough to stop the growing number of businesses going bankrupt.

The new scheme was a "huge disappointment," according to Martin McTague, chair of the Federation of Small Businesses.

'While the New Year should be a time of optimism and excitement, 2023 looks like the beginning of the end for tens of thousands of small businesses, which have been relying on the government energy support to survive this winter,' he said.

'What's certain from this catastrophic move is there'll be a cliff edge after March. The small fish and chip around the corner, your local pub, and the family-run independent laundrette – all will see much higher bills. That's on the Government.'

Whereas wholesale gas prices have begun to fall over the last week, they increased significantly, and many businesses signed fixed agreements at higher costs.

According to FSB research, one-quarter of small businesses expect to close, lay off workers, or alter their model once the energy cap expires in March.

McTague added:r those struggling, the discount through the new version of the scheme is not material. Many small firms will not be able to survive on the pennies provided through the new version of the scheme.

'This is so out of touch. Two pence off a kWh off electricity and half a pence off gas is totally insignificant for small businesses, despite costing billions to the taxpayer. The Government will inevitably have to come backThe announcement was the 'final nail in the coffin for many,' according to Sacha Lord, Greater Manchester's night time economy advisor.

According to UK Hospitality, the new scheme will cost the industry at least £4.5 billion over the next year.

Kate Nicholls, the head of the trade body, urged Hunt to rethink other measures that would benefit the sector, such as raising the business rates relief cap.

The 'risks stoking inflation'

Industry leaders have also expressed concern about the effect on the overall economic system if small businesses are left to fend for themselves.

The director of the British Chambers of Commerce, Shevaun Haviland, said: 'We understand Government must consider public finances, but any support package, short or long term, should be right for business - otherwise we're going around in circles.t is a critical year for the UK economy and with the right focussed support, businesses can help turn the economy around and get the UK back to growth and prosperity.'

McTague warned that the sudden reduction in support risked fueling inflation as small businesses' bills rose, forcing them to raise their prices.The EBRS original scheme suppressed inflation by 5 percentage points, but this has been cancelled... Slashing support will drive higher inflation, just as we enter a recession.'

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