Energy companies, including Shell, Centrica and Ovo, have called on the UK government to introduce Covid-style support schemes to help businesses cope with soaring gas and electricity bills.
In a letter to chancellor Nadhim Zahawi on Friday, industry lobby group Energy UK, which represents about 100 suppliers and retailers, said it was concerned that the tenfold rise in wholesale gas prices compared with the start of 2021 would affect the “viability of small businesses”, as well as local authorities, schools, leisure centres and hospitals.
The group urged the government to introduce grants similar to the £45bn paid through local authorities during the coronavirus pandemic, a Treasury-backed loan scheme and exemptions from business rates. It also called for value added tax to be removed from energy bills.
Dan Alchin, Energy UK’s director of regulation, said: “The government helped support businesses through the pandemic and sadly this current crisis is of a similar magnitude for many of them — threatening closures, job cuts and higher consumer prices.
“Having worked so hard to get so many of these customers through one crisis, we need to do everything possible to avoid losing them to this one.”
Although households are protected from sudden swings in the wholesale cost of gas by a price cap, there are no such measures for companies.
Many companies have been protected so far by long-term energy contracts, which are due to be renegotiated this month. Some are struggling to find deals.
MPs have become increasingly aware of the potential impact of an “iceberg” of rising energy bills on businesses in months ahead.
Foreign secretary Liz Truss, the frontrunner to become the next UK prime minister, has shifted from a laissez-faire position of “no handouts” to promising to help both households and companies cope with the energy shock.
Zahawi is drafting a suite of proposals to support companies through the imminent crisis, including cuts to VAT and business rates, as well as specific tax breaks for energy-intensive industries.
He told The Times on Friday that failure to act could force many companies into bankruptcy and cause long-term economic “scarring”.
The British Chambers of Commerce on Friday urged the government to draw up a “comprehensive plan” to help companies weather the crisis, including Covid-style emergency grants, a cut in VAT on energy bills and increased regulation of the energy market for businesses.
“Time is fast running out, the government must step up to the plate and do what is needed to protect businesses, livelihoods and jobs,” said Alex Veitch, BCC’s director of policy and public affairs.
Mathew Lawrence, director of the Common Wealth think-tank, welcomed the calls to support business but described the measures recommended as a “temporary fix that do little to address a failing market”.
“Some of these companies calling for support to business are making substantial profits themselves during the current crisis, raising questions as to why they can’t dip into their own pockets,” he added.
In a statement, the Treasury said: “We understand that people are struggling with rising prices, and while we can’t shield everyone from the global challenges we face, we’re supporting British businesses to navigate the months ahead.”
The government has increased the employment allowance, cut fuel duty, introduced more business rates relief for the retail, hospitality and leisure industries and frozen the business rates multiplier, the Treasury said.
“We are also making the necessary preparations to ensure a new government has options to deliver additional support as quickly as possible,” the Treasury added.