Nearly a quarter of smaller businesses in the UK (24%) plan on closing down, downsizing or radically changing their business model if energy bills are reduced in April next year, according to a new survey.

According to the Federation of Small Businesses (FSB), this rises to 42% of food and accommodation businesses and 34% of wholesale and retail businesses.

Nearly half of small firms (46%) have already raised their prices, but due to a decrease in consumer spending, "it has been impossible for them to pass on full costs to consumers", according to the FSB, which will put businesses in an even tighter spot.

A further 44% of small firms are considering raising prices to cope with the increasing bills when the Government's energy bill relief scheme (EBRS) ends next year.

Energy bill relief scheme

Former Prime Minister Liz Truss first announced the EBRS to run between 1 October 2022 and 31 March 2023, as well as a review to determine the policy's future after its initial six months.

The scheme is available for businesses, voluntary organisations and public sector organisations who are:

• on existing fixed-price contracts agreed on or after 1 December 2021
• signing new fixed-price contracts
• on a flexible purchase or similar contract
• on deemed or out-of-contract or variable tariffs.

The discount is calculated and applied automatically through an estimated wholesale unit price and has been set at:

• £211 per megawatt hour (MWh) for electricity
• £75 per MWh for gas.

Businesses benefit from energy bill relief

Data from the Institute of Directors (IoD) found the EBRD has staved off "serious risk" for 24% of business leaders and prevented 5% from having to cease trading.

Another 11% said they had been able to keep their business running because of the price cap, while 35% said the scheme had made business planning easier.

Business leaders call for extension to ERBS

In light of its findings, the FSB advocated the Government to continue the EBRS beyond 1 April 2023, and also consider the size of businesses when determining which firms deserve support, and not sector or geography.

Martin McTague, national chair of the FSB, said:

"Our research indicates that small firms are being held back from investment and are at the brink of collapse because of sky-rocketing energy costs.

"It'd be a real shame and great loss to our economy if those who managed to get through and pandemic and this tough winter with Government support end up closing their businesses because relief ends too sharply in April."

Alex Hall-Chen, senior policy adviser at the IoD, said:

"Our data shows that the Government's Energy Bill Relief Scheme has been a crucial intervention, removing a serious risk to around a quarter of businesses.

"We therefore urge the government to continue the EBRS for sectors of the economy particularly vulnerable to current fluctuations in international energy markets.

"To this end, we are concerned that no provision was made for the extension of the scheme beyond March 2023 in the Autumn Statement".

The Treasury is currently leading a review to determine support for businesses beyond 31 March, which it said will be published by 31 December 2022.

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