The development manager for Federation of Small Businesses (FSB) Hampshire, Dorset and Isle of Wight, Nicky Kildunne, has expressed concern that small businesses will be adversely affected by a reduction in energy support.

The government announced a new scheme on Tuesday 10 January.

Nicky Kildunne said: “The decision to all but eliminate help through the Energy Bill Relief Scheme (EBRS) is a huge disappointment for small businesses. For those struggling, the discount through the new version of the scheme is not material. Many small firms will not be able to survive on the pennies provided through the new version of the scheme.

“This is so out of touch. Two pence off a kWh of electricity and half a pence off gas is totally insignificant for small businesses, despite costing billions to the taxpayer. The government will inevitably have to come back.

“The current EBRS scheme provides certainty for a small business owner over their rates, and has made a material difference to the survival of many small businesses. The replacement scheme will do neither.

“While the New Year should be a time of optimism and excitement, 2023 looks like the beginning of the end for tens of thousands of small businesses, which have been relying on the government energy support to survive this winter.

“In addition to the withdrawal of the vast majority of support to cope with high energy prices, this decision also risks stoking inflation as small businesses bills rise, but their prices will rise at the same time. The EBRS original scheme suppressed inflation by 5% points, but this has been cancelled. Slashing support will drive higher inflation, just as we enter a recession.

“Our latest research shows one in four small firms anticipate either closing, downsizing, or radically changing their business model when the government reduces energy support after March. Five days after the prime minister’s pledges to restore optimism and hope and grow the economy, small firms will feel let down by his decision to call in the scheme decision planned for December, and cutting back the scheme to such a minimal state.

“What’s certain from this catastrophic move is there’ll be a cliff edge after March. The small fish and chip around the corner, your local pub, and the family-run independent laundrette – all will see much higher bills. That’s on the government.

“Gambling that wholesale energy prices will continue to fall this year is transferring the risk of further energy price shocks to small businesses.

“Dividing the scheme into two tiers is sensible, but not so that the tier of support for any small businesses lighting or heating premises, or using freezers or ovens, has been set so low as to mean support diluted to such a feeble level. It would have been better value for money for small firms if the £2bn cost of their element of the scheme had been used to improve energy efficiency, to reduce the need for energy from the grid.

“The government said that taxpayers cannot prop up failing or unproductive firms, which is insulting to many small business owners struggling this winter.

“Since the onset of Covid, we’ve lost half a million small firms. Allowing more well-run businesses to go under would be a false economy. But with this absurd degraded Energy Bills Discount Scheme, it looks like we’re getting there.”