With no current financial help from the government, the major cost-of-living crisis and rising inflation (which is predicted to reach 18% next year!) continues to shake UK businesses, leaving many SMEs teetering on the edge of the danger zone. In fact, a report from SME Insights and Simply Business found that 54% of small businesses fear that rocketing energy bills are going to force them to close their doors for good. Yet the reality is that many are already shutting up shop as the financial burden has become too heavy.
The newly appointed Prime Minister Liz Truss has promised to help households with rising energy bills. But what about businesses? There are talks of small business grants coming into play, offering a lifeline to SMEs who can’t afford to keep the power or heating on during the current crisis.
What Could These Energy Grants Look Like?
With a new PM and a new Chancellor, there’s obviously quite a lot of uncertainty at the minute, but it’s been suggested that Treasury officials have been drawing up proposals that could help small businesses through the winter period. The BCC has estimated that roughly 4.5 million SMEs will require approximately £5,000 in financial help just to keep afloat this winter – meaning the government would need to provide around £23 billion in support.
So what might this support look like? Some are saying that the government may decide to repurpose the small business grants that were used during the pandemic. These would use a similar framework that was established during the pandemic, which were shown to work at scale. Other possible options include offering business rates relief, tax breaks for industries that are energy-intensive, or reducing VAT rates. Many businesses are charged at 20% VAT for their energy bills, whereas households usually pay 5%, so reducing business VAT rates in line with household rates would be a welcome change.
The Federation of Small Businesses (FSB) is also calling for discretionary energy grants and for the price cap to apply to the smallest businesses, with its chief of external affairs Craig Beaumont commenting:
“This help cannot arrive soon enough, as we are seeing the first businesses close their doors now, before energy use rises from next month into the autumn.”
When Might These Energy Grants Come Into Effect?
It really is a waiting game until we hear what Liz Truss is planning to propose. An emergency budget could potentially take place on the 21st September so hopefully we will learn more about Truss’s plans soon, ahead of energy contract renewal dates in October.
In the meantime, don’t forget to take a look at our energy-saving tips for businesses. Here you’ll find suggestions on several small changes you can make that could help keep your energy bills down – both at home and at the office.