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Monday, August 22, 2022

Firms may be offered grants to pay for energy


By Timothy Adler on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs

Chancellor Nadhim Zahawi on a tour of Airbus, energy grants concept

Chancellor Nadhim Zahawi is considering grants for small businesses to help them get through the energy crisis, similar to previous Covid financial support.

Treasury officials are drawing up a package of proposals to bail out businesses this winter – including discretionary energy grants – otherwise thousands of small businesses could go bust because of uncapped electricity prices.

One option could be to repurpose Covid schemes to help businesses survive sky-high energy bills. The attraction of repurposing Covid support is that its funding mechanisms – administered by local government – were shown to work at scale.

>See also: How to find the best energy supplier for your small business

Other ideas include VAT and business rates holidays to reduce overall SME bills. These were deployed during the pandemic to help firms in the hospitality, leisure and tourism sectors survive lockdowns.

However, any decision would be down to the incoming prime minister, with Foreign Secretary Liz Truss seen as the frontrunner, and whether they want to add to the national debt. Truss has already pledged to cut national insurance contributions, reverse the planned increase in corporation tax and remove green levies on energy bills – measures which will already cost Treasury between £30bn-£50bn.

Discretionary energy grants

An emergency budget has been penciled in for 21 September where Truss will reveal how the government will help voters whose energy bills are set to rise to £3,500 in October and £4,200 in January. The Federation of Small Businesses has called for the smallest firms to be included in a price cap, as well as discretionary energy grants as well as through the business rates system. It also wants a cut in VAT on energy bills for small businesses, which pay 20 per cent compared with the 5 per cent rate for households.

>See also: Business energy costs: how can you slash your gas and electricity bill?

Paul Wilson, policy director at the FSB, told the Times: “There’s a huge amount of worry, because although there have been interventions from the government to help households with the energy situation — and rightly so — there haven’t been any interventions to help businesses, despite the fact we have been talking about these issues for a year now.”

A senior energy industry source told the newspaper that the government was banking on people limiting their energy usage, and therefore their bill, before it had to make an intervention costing billions. The priority was to help voters first and then worry about companies later, he said.

“Business customers have typically got more tools at their disposal to reduce their energy bills than households. It’s a real problem for businesses, but the biggest priority is consumers,” he said.

Another idea being bruited – similar to the concept being floated by supplies ScottishPower and Eon – would cap the amount they have to pay. Energy suppliers would then claw back the difference from the government, allowing them to charge a rate which is lower than current wholesale prices without losing money in the process.

Further reading

9 of the best business energy suppliers based in the UK

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Timothy Adler, Khareem Sudlow