Energy price rises could push businesses ‘to the brink’

New survey data published by the business organisation reveals the extent to which companies are concerned about soaring energy costs. This includes the fact that 69% expect their energy costs to increase in the next three months, with almost a third anticipating rises of more than 30%. 

Despite this, firms are doing what they can to absorb costs, with around one in three saying they do not expect to pass on additional energy costs. Additionally, 30% see energy price rises as likely to negatively impact current or planned investment in net zero measures. 

Off the back of this, the CBI has said it will work with new ministers to explore options for navigating the crisis, proposing a three-point plan that can be delivered to support vulnerable consumers and businesses. 

Firstly, in order to target support at those businesses and firms most in need, the government should introduce targeted interventions for the most vulnerable households and instruct HMRC to replicate the Time to Pay flexibility granted during the pandemic. 

Additionally, it should launch a publicity drive around the recent extension to the Recovery Loan Scheme and commit to its expansion should evidence show this is needed, and that preparatory discussion with lenders should begin now. 

Secondly, in order to keep costs down, the government should announce a business rates freeze now for 2023/24. 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. 

Finally, the CBI believes the government should kickstart an energy efficiency drive to reduce demand by rolling out a programme to improve energy efficiency by providing people with upfront financial support to help retrofit household insulation. 

Additionally, they should provide energy efficiency support in the most energy-intensive sectors through an expansion of the Industrial Energy Transformation Fund.  

The CBI’s chief policy director Matthew Fell 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.”