From April this year, the UK Treasury intends to discontinue its financial assistance for small and medium-sized enterprises concerning their energy bills and expenses. Working with suppliers will reduce wholesale energy costs - and the significant increases in bills that businesses have seen.
The government had initially put aside £18 billion to shield firms from energy price increases between October and March of last year. Still, it said they would cap support at £5.5 billion for businesses over 12 months from 1 April 2023.
Despite the government creating an Energy Bill Relief Scheme (EBRS) in advance of the winter months, energy bills rose considerably in 2022, forcing many firms into insolvency.
This initiative cut energy prices for all non-domestic users across the country, although it was only supposed to last until the end of March 2023.
Following consultations with industry leaders in recent weeks, chancellor Jeremy Hunt intends to cut the amount of public money necessary to help firms and charitable organisations meet their energy bills.
Mr. Hunt has argued that keeping the relief plan as it was beyond April would be "unsustainably expensive" and that "no government can indefinitely protect firms from the energy price shock."
Energy Bill Discount Scheme summary
For eligible non-domestic customers who have a contract with a licensed energy supplier, the government has unveiled the following support:
For eligible Energy and Trade Intensive Industries, the government is announcing:
The Federation of Small Businesses (FSB) has warned the chancellor that suddenly eliminating help for enterprises concerning their energy costs will result in "a raft of business closures."
Small businesses dipping into life savings to stay afloat amid rising costs.
Businesses are depleting their financial reserves to stay afloat.
Rising prices, decreased revenues, and increased pay bills prompted small and medium-sized enterprises to use their funds by the end of 2022.
According to the findings of an Investec poll, 43% of organisations plan to deplete their reserves in the next six months, with 4% expecting their savings to be wiped out.
Furthermore, increased interest rates will make it more expensive for firms to get loans in the next year. According to Investec, fewer borrowing alternatives will force some firms into administration.
The Energy Bill Relief Scheme is expected to cease in March, and no announcements for any alternative assistance have been offered. Business organisations have warned that businesses' energy expenses might double if the plan expires.
According to Investec, a tiny percentage of CEOs were able to increase their savings at the end of last year due to more substantial growth. However, a quarter claimed they could improve their savings because they reduced employment or couldn't find the right people to fill available positions.
Investec believes that SMEs have an average of £117,000 in savings accounts, albeit this varies greatly amongst businesses. A quarter of companies, notably those in high-growth IT industries, indicated they were utilising savings to "invest in the expansion of their business."
According to the Office for Budget Responsibility (OBR), corporate investment is anticipated to slow in the forthcoming years as increased energy costs and economic uncertainties stifle growth.
"SMEs are inevitably feeling the economic strain from rising prices and increases in their energy bills as well as issues with recruiting staff and funding pay rises for their existing workforce," said Samantha Booysen of Investec."
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