The new study showed small firms’ survival during the ongoing energy price crisis will depend on continued government support through Energy Bill Relief Scheme (EBRS) beyond March 2023.
Results of the survey showed that nearly half of all small firms expect to further raise prices in response to the crisis if support ends in April and more than a third have already frozen growth plans due to soaring energy costs.
The survey, which measured the impact of the energy price crisis on small businesses, showed small firms are anxious and want clarity on whether they will still be eligible for support amid the ongoing government review of the six-month scheme, which is due to end on 1 April 2023.
The findings have been submitted to the Department for Business, Energy & Industrial Strategy (BEIS).
The survey found that if energy support packages are discontinued, 42 per cent of firms in the accommodation and food sector, followed by the wholesale and retail (34 per cent) and manufacturing sectors (29 per cent) will most likely close or downsize.
Additionally, more than four in 10 small firms (44 per cent) are considering raising prices to cope with soaring bills when the current EBRS is due to end and a third (30 per cent) expect to cancel or scale down planned investments.
One in five (18 per cent) said they would need to keep prices the same, even though their energy bills are increasing because customers simply cannot afford further increases.
A majority (63 per cent) said energy costs have increased this year compared to last year. Some 44 per cent reported a double, triple, or even higher increase in their energy bills and nearly one in five (19 per cent) said their bills had tripled or higher.
In response to the increasing bills, nearly half of small firms (46 per cent) have already raised prices although it has been impossible for them to pass on full costs to consumers tightening their belts amid the cost-of-living rises.
The FSB said there are immediate measures the government can take including continuing support under the current EBRS to avoid a cliff edge on 1 April 2023.
It also suggests considering the size, not just sector or geography, of firms when determining which businesses are vulnerable and therefore entitled to further support.
FSB national chair, Martin McTague, said the research indicated that small firms are being held back from investment and are on the brink of collapse because of skyrocketing energy costs.
“It’d be a real shame and great loss to our economy if those who managed to get through the pandemic and this tough winter with government support end up closing their businesses because relief ends too sharply in April,” he said.
“Latest OECD forecasts suggest the UK economy will suffer the biggest hit from energy crisis among G7 nations. But the tides can be turned if the government extends the period of energy support to struggling small businesses after the EBRS ends in April next year.
“It’s important that the government provide certainty to small firms for the long-term as they can’t plan on a six-month horizon.
“Think of the engineering business in Hampshire which 40 local families are dependent on, and the independent launderette that has been serving the community for years. To allow well-run businesses to go under would be a false economy as we enter a recession.
“Business size must be taken into account as a relevant factor in the government review of the EBRS, given the stark impact on small firms which have typically lower margins and are least able to deal with the rising costs. It can’t be a purely sector-based decision, otherwise it’ll lead to deadweight and unfairness.”
