Government rolls back energy support for businesses, leaving indies at risk

05 April 2023, 14:05 PM
  • The energy price cap scheme has been replaced with a discount as the government scales back its support for businesses
Government rolls back energy support for businesses, leaving indies at risk

Independent retailers have been battling against soaring costs with skyrocketing energy prices eating into profits as a result of the Ukraine crisis and subsequent shortages.

While energy bills were heavily subsidised by capping wholesale prices, which provided the industry with some short-lived relief, the government has now scaled back its support and replaced the current scheme with a discount.

The less generous Energy Bill Discount Scheme (EBDS) provides general businesses with a discount when electricity and gas prices hit £302/MWh and £107/MWh.

The impact on indies
According to Jeff Moody, commercial director at the British Independent Retail Association, small retailers in particular will be hit hard. 
He told Speciality Food, “As the EBRS has come to an end and been replaced by the EBDS (Energy Bills Discount Scheme) many retailers are now even more worried over fuel costs and their future business. Now retailers have a choice. We have a member who has said they are uncertain which way to go – do they go for a new fixed contract for a year at 30p a unit, when they had a fixed which ran out at 11p? The alternative is 85p not fixed. But if energy prices drop as predicted, 30p is a good deal for 12 months. Even so, it is still a 172% increase.

“Based on government figures, for a small shop, the support will fall from £6400 per annum to £400 per annum. So that small shop owner has to pay £500 per month more at a time when consumers are not spending as much.”

As Martin McTague, national chair at the Federation of Small Businesses, explained, “Small independent retailers who fixed their energy contracts at high rates last year will see, from this month, their bills revert back to the pre-Energy Bill Relief Scheme level. This could mean three or even four-fold increases in their energy bills as government support has been largely downscaled.

“The replacement scheme won’t touch the sides of these huge bills. Our analysis shows 370,000 small businesses are at risk of shrinking, closing or restructuring their businesses as a result of the cuts to government support.”

Staying afloat as support slows
As the energy support scheme rolls back, indies will need to be resilient to stay afloat. 

Jeff explained, “Retailers continue to work hard to keep prices, particularly of essentials, as low as possible by expanding value ranges and offering discounts for vulnerable groups. But consumer confidence is massively dampened and can be seen by large drops in footfall into shops. As Easter approaches retailers need good weather and increased confidence – unfortunately only one is in the control of the government.

“Indie retailers need to have a focus on quality brands whilst also offering some ‘value’ into their product range, either through discounting, bundled offers, etc.”

However, there is hope on the horizon, as Enterprise Nation’s latest barometer showed small business confidence is beginning to pick up.

According to founder Emma Jones, “While discretionary spending might be on hold, customers will now be more open to shopping around and so it’s vital that small food businesses on the high street make sure they are using affordable ways to reach new customers to market their products and business. Using technology and social media are key ways to do this.”

Restoring government support
According to Jeff, the government must do two things as soon as possible to give retailers some light at the end of the tunnel.

“Firstly, give government support for retailers. By removing concerns over current and future rates charges, whilst reviewing the support for SMEs over the next 12 months before the anticipated fuel price drops, action now will save thousands of shops. 

“Secondly, the government needs to restore some confidence in consumers and get them spending again through fiscal support and delivering lower inflation sooner rather than later. Until consumers start spending retail is in a very precarious position”, Jeff explained. 

Martin added, “We urge the government to allow small firms who signed up to fixed rates last year to renegotiate and ‘blend and extend’ their energy contracts, meaning they can come out from the high fixed price with their energy suppliers, and agree to a new fixed term contract based on the lower prices that we see at the moment.

“The Department of Energy Security and Net Zero has answered our calls to provide small firms with funding for green improvements, alongside advice to reduce energy use, in the form of a pilot. In the long-term, we’d like to see this be scaled up to a national-wide programme as part of our ‘Help to Green’ proposal to help small firms invest in energy efficiency, such as better insulation and micro-generation to reduce energy needs and lower bills.”

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