Energy crisis could lead to a ‘generation of lost businesses’

Nearly 14% of UK small firms expect to close their business in the coming 12 months, according to a new report

Big Zero Report 2022

A business lobbying organisation has warned that soaring energy prices and bills could trigger a domino of collapses resulting in a lost generation of small firms.

Data published by the Federation of Small Businesses (FSB) shows that nearly 53% of small companies expect to stagnate, downsize or fold in the next year.

The FSB’s report suggests companies find increased costs as the main reason for their impacted future business outlook.

Fuel and utilities were the most-mentioned causes of this increase in costs, according to the survey.

FSB National Chair Martin McTague told ELN: “Far too many small businesses are finding it hard to stay afloat with spiralling operating costs and reporting energy bills mushrooming by four or five times in recent months.

“While domestic consumers quite rightly have at least some protection through the price cap and are being given direct cash support, there is no price cap for small businesses and currently no financial support either, despite many seeing energy costs soaring at an alarming rate.

“We also need to see immediate allocation of unspent Covid additional relief funding to help businesses with rising energy costs.”

Mr McTague added that there are levers the government can pull – energy bill support for small firms to match that given to households, a reduction in VAT on energy, a cut in fuel duty.

He said: “Cost pressures more widely could be eased through a reversal in the recent national insurance hike and taking more small firms out of business rates. The government needs to grasp hold of these levers and start pulling them now.

“Small businesses are at the heart of both the economy and communities, and account for 60% of private sector employment.

“The importance of providing support for small businesses in these worrying times cannot be over-stated and must not be overlooked. The number of small firms in the UK shrank by almost 400,000 over the first year of the pandemic. Without support at this time of costs crisis, this year could turn out to be equally catastrophic.”

 

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