The Federation of Small Businesses (FSB) has warned that over 93,000 small businesses in the UK could face closure, downsizing, or radical restructuring due to being locked into fixed-price energy contracts that were signed during last year’s peak energy prices.
During the summer of last year, the UK government encouraged small businesses to enter fixed-term energy deals to lock in the day’s prices for a year or more.
This move aimed to help businesses benefit from the government’s energy support scheme, which significantly reduced their bills.
However, six months later, the initial support scheme was terminated and replaced with a less generous programme, leaving many businesses with unaffordable energy bills.
The FSB is now calling for these companies to be offered new, more sustainable contracts.
Fixed-Cost Energy Contracts Pose Risk to SMEs
According to the FSB, around 13% of its members entered fixed energy contracts in the latter half of last year.
Approximately one in 10 of these businesses now believe they may need to close or drastically alter their operations.
The FSB recommends that energy suppliers offer these companies the opportunity to extend their fixed contracts at a lower rate, ideally between their original price and the current, more favourable market price.
FSB policy chair, Tina McKenzie, said, “Many small businesses agreed to lock in energy contracts last year to ensure they qualified for the maximum level of government support.
Now, with that support largely disappearing, they are once again faced with massive energy bill hikes as rates go back to pre-Energy Bill Relief Scheme levels.”
She added, “If ending the successful support scheme is on the basis that wholesale energy prices have gone down, then our research sheds light on just how many small businesses have been overlooked as they are entangled in high fixed tariffs.”
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