Government’s decision to virtually eliminate energy help for small businesses is disappointing - Louisa Harrison-Walker

The third existential blow comes in the form of surging energy prices and is simply proving too much to withstand for many business owners.

I’m hugely disappointed with the government’s decision to virtually eliminate help for small businesses as part of the Energy Bill Relief Scheme. For those already struggling, last Monday’s announcement will come as a bitter blow and leave them on a cliff edge.

Many brilliant businesses are at breaking point and pulling the plug on government support will only add to difficulties and further stifle UK growth and competitiveness.

It has been suggested that the scheme in its current form was unsustainable for the public purse. A more sustainable, longer-term solution is undoubtedly needed but slashing relief by 85 per cent and failing to consult with SMEs isn’t the answer.

Let’s be clear. This isn’t just another government hand-out scheme. It’s about investing to secure jobs, economic confidence and the long term existence of thousands of British businesses.

Whilst the newly announced higher discount on wholesale gas and electricity prices for some energy intensive industries has been welcomed and will provide some confidence for heavy users and manufacturers, in the main, it offers little to the UK’s 5.5 million SMEs.

January used to be a time in business when we looked forward to a new year with optimism. We’d wipe the slate clean on the year before and anticipate a fresh start with renewed energy. The turn of the year used to be accompanied with plans for growth, innovation and investment. But this year has started much the same way as 2021 and 2022 – with crippling uncertainty and much apprehension. And it didn’t need to.

Businesses in Sheffield who are members of Sheffield Chamber are telling the Chamber team that it’s quite impossible to plan for the future when operating costs are so uncertain.

That means they’re putting off decisions to grow, hire new staff, roll out new products or expand their operations. This economic inertia is paralysing and hugely detrimental.

South Yorkshire is already lagging behind the rest of the UK when it comes to productivity and we know that if the output of South Yorkshire’s workers equalled England’s average, the region’s economy (GVA) would be £7.2bn bigger. That means more jobs and greater prosperity for our region.

The impact of stifling innovation and growth, whether demonstrated through stories like the one at the top of this article or by hard facts, cannot be understated.

So, what can be done? Firstly, Ofgem’s powers must be increased so it can better regulate energy rates and industry practice. While households are protected by Ofgem’s regulation of the domestic energy market, there is currently very little regulation of the energy market for businesses.  

Businesses must be able to access competitive fixed rates and energy companies must pass on reductions, especially when wholesale costs drop.

Up to a third of the cost of electricity bills can be made up of taxes and other non-commodity costs and these receive no support by way of Government approved exemptions. These ‘hidden’ costs need to be addressed and the whole process of securing flexible energy deals needs simplifying and better regulation.

Unfortunately, higher energy prices are the new normal and we’re looking to the government to give the necessary support, such as grants and green loans or tax breaks for businesses to invest in better energy sources. We’re seeing a lot of innovation in this sector from solar, to wind to heat pumps.

We know from our colleagues at the British Chambers of Commerce, which represents 70,000 businesses nationally, that almost half (47 per cent) of UK SMEs said they will find it difficult to pay their energy bills when Government support ends. It’s very concerning that 4 per cent say they won’t be able to pay their energy bills after March 31 this year.

Energy cost is the number one priority for businesses, and it must be an absolute priority for the government too.

It’s important that we continue to support our local businesses and consciously make an effort to shop local.

Louisa Harrison-Walker is chief executive of the Sheffield Chamber of Commerce.