A vast majority of firms in the UK have been tipped to be headed towards major crisis unless the government offers substantial support to cushion the effect of the soaring energy prices.
On Monday, Business Secretary Kwasi Kwarteng floated a proposal to the Treasury to offer financial aid to help large firms, with a particular focus on energy-intensive industries like chemicals, steel and ceramics navigate through the damaging effects of the rising energy prices.
But the smaller firms have also clamoured that they too are not insulated from the cataclysmic effects of soaring gas and electricity bills.
According to James Martin, director of policy at the British Chambers of Commerce (BCC), the predicament faced by small and medium-sized firms, in particular, is “becoming dire,” particularly due to supply chain disruption, labour shortages, price rises, soaring energy bills and taxes.
“If help from government is not forthcoming, then it is unfortunately the case that thousands of firms would not survive the winter as a result.”
A recent survey by BBC found that more than two-thirds of firms have not recorded any increase in investment or cash flow after businesses reopened in the wake of the Covid lockdown restrictions.
Whereas households are protected by the energy price cap, there is no consequent protection for business owners, meaning suppliers can charge from high to extortionate rates for energy bills.
According to Martin, there is now a “clear case” for a cap for small firms.
Mike Cherry of the Federation of Small Businesses (FSB) believes Small and Medium-scale Enterprises are now in a “very dangerous space” due to the spike in energy bills.
“Small businesses lack the leverage to negotiate with energy suppliers that bigger businesses have, and they lack the protections that domestic consumers benefit from,” Mike said.
The FSB has also urged for an extension of the price cap, an imposition of a limit on the amount of credit that suppliers can build up from each customer, and also protection of credit balances when suppliers go bust – measures that are already in place for consumers.