Businesses at risk with rising energy costs, CBI warns

The survey data shows that over two-thirds of firms expect their energy costs to increase over the next quarter, and a third of businesses expect energy price rises to act as a barrier to growth by stifling current or planned investment in energy efficiency or Net Zero measures. 

The business organization added that further energy price rises could push many viable businesses to the brink unless urgent action is taken to support them and their supply chains.  

Matthew Fell, CBI chief policy director, said: “The impact of soaring energy prices on households is going to have serious consequences, not just for individuals but for the wider economy.  

“While helping struggling consumers remains the number one priority, we can’t afford to lose sight of the fact that many viable businesses are under pressure and could easily tip into distress without action.”      

Fell continued: “The guiding principles for any intervention must be to act at speed, and to target help at those households and firms that need it most.” 

The CBI said it will work with new ministers to look at all options for getting through the crisis and has today (August 24, 2022) proposed a three-point plan that it said can be delivered quickly to support vulnerable consumers and businesses by targeting help where it is needed most.

 To target support at those households and firms most in need, the UK government should: 

• Urgently introduce targeted interventions for the most vulnerable households, through existing mechanisms like the Energy Bills Support Scheme   
• Instruct HMRC to replicate Time to Pay flexibility granted during the pandemic to take account of energy price rises 
• Launch a publicity drive around the recent extension to the Recovery Loan Scheme and commit to its expansion should evidence show this is needed; preparatory discussions with lenders should begin now, so future decisions can be taken at pace if the situation deteriorates and further help is needed  

To help keep costs down, the UK government should: 

• Announce a business rates freeze now for 2023/24. This would head off a business-as-usual approach that would otherwise see rates increasing with inflation, and piling additional pressures on firms when they can least afford them. (Governments in devolved nations should do the same) 

To kick-start an energy efficiency drive to reduce demand, the UK government should: 

• Roll out an ambitious programme to improve energy efficiency by providing people with upfront financial support to help retrofit household insulation (through a new ECO+ scheme) 
• Provide energy efficiency support for the most energy intensive sectors through an expansion to the Industrial Energy Transformation Fund  

Fell said: “Firms aren’t asking for a handout. But they do need Autumn to be the moment that government grips the energy cost crisis. Decisive action now will give firms headroom on cashflow and prevent a short-term crunch becoming a longer-term crisis.

“With firms under pressure not to pass on rising costs, there is a risk that vital business investment is paused or halted entirely. That in turn could pose a real threat to the UK’s economic recovery and Net Zero transition.”