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Businesses ‘pushed to the brink’ by energy crisis

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Written by: Emma Lunn
24/08/2022
The Confederation for British Industry (CBI) has warned that a growing number of firms will face ‘distress’ unless the government gets a grip on the energy crisis.

The CBI is calling for more time for businesses to pay their tax bills and for business rates to be frozen while firms cope with soaring energy costs.

A survey by the CBI found that more than two-thirds of firms expect their energy costs to increase over the next quarter. A third of firms 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 body warned 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.

The CBI has proposed a three-point plan that it says can be delivered ‘at pace’ to support vulnerable consumers and businesses.

Firstly, it urged the government to increase the support offered to households via the Energy Bills Support Scheme, while calling for HMRC to replicate Time to Pay flexibility granted during the pandemic to take account of energy price rises.

Secondly, the CBI says that to help keep costs down, the UK government should announce a business rates freeze now for 2023/24. It says 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.

Thirdly, the business organisation called for an energy efficiency drive to reduce demand, including upfront financial support to help retrofit household insulation.

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.

“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. 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.”

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