Recent research from Experian shows that one in three small businesses could struggle financially when the energy price cap ends on the 31st March.
Experian’s analysis found that a third of small businesses may not have enough cash to cover their costs when the government’s price cap ends.
The energy price cap set a limit on how much suppliers could charge for each unit of gas and electricity used. However, after Jeremy Hunt referred to the cap as “unsustainably expensive”, the Energy Bills Discount Scheme was announced in January.
The new scheme offers a discount on wholesale prices rather than a fixed price and will run to March 2024. It’s expected to benefit companies with particularly high energy usage, such as steel and glass, but has done little to alleviate concerns for small firms.
The research forecasts that 30% of the businesses analysed will become “at heightened risk” after March. In other words, they may not have enough cash to absorb the energy price shock once the current price cap ends.
This figure more than doubles the percentage of businesses currently deemed to be at heightened risk, which stands at 13%.
Small Business Commissioner Liz Barclay described the figures as “worrying” and highlighted that late payments continue to pose a threat to the viability of small businesses.
“Many are struggling to get paid quickly by their bigger customers. If bigger firms are holding onto cash in case they need it for business-critical expenditure, small suppliers can struggle to manage their cash flow and pay their energy and other bills while waiting,” she said.
“If energy bills go up again, that could break the business. We need bigger customers to pay smaller suppliers as a priority to give them a fighting chance of survival.”
Struggling with late payments? Read our guide to politely chasing overdue invoices here.
Some UKBF users are already looking ahead to the Spring Budget, in the hope that there’s more small business support coming. As UKBF user BobzYourUncle put it in this thread:
“The post mortem [of the Energy Bills Discount Scheme] does not fill me with much optimism for the survival of small businesses I'm afraid,” they said.
“Unless the government mitigates this useless scheme with other meaningful help like VAT cuts or grants in April, hospitality businesses (especially independents) are very much buggered.”
Experian’s analysis found that a third of small businesses may not have enough cash to cover their costs when the government’s price cap ends.
The energy price cap set a limit on how much suppliers could charge for each unit of gas and electricity used. However, after Jeremy Hunt referred to the cap as “unsustainably expensive”, the Energy Bills Discount Scheme was announced in January.
The new scheme offers a discount on wholesale prices rather than a fixed price and will run to March 2024. It’s expected to benefit companies with particularly high energy usage, such as steel and glass, but has done little to alleviate concerns for small firms.
Small businesses “at heightened risk”
Experian analysed the finances of 1.16 million small businesses by looking at cash balances and credit and debit turnover records using the Commercial Credit Data Sharing scheme. It then used public data from the Office of National Statistics, gov.uk and Experian’s BusinessView database to calculate the monthly expenditure of these businesses.The research forecasts that 30% of the businesses analysed will become “at heightened risk” after March. In other words, they may not have enough cash to absorb the energy price shock once the current price cap ends.
This figure more than doubles the percentage of businesses currently deemed to be at heightened risk, which stands at 13%.
Small Business Commissioner Liz Barclay described the figures as “worrying” and highlighted that late payments continue to pose a threat to the viability of small businesses.
“Many are struggling to get paid quickly by their bigger customers. If bigger firms are holding onto cash in case they need it for business-critical expenditure, small suppliers can struggle to manage their cash flow and pay their energy and other bills while waiting,” she said.
“If energy bills go up again, that could break the business. We need bigger customers to pay smaller suppliers as a priority to give them a fighting chance of survival.”
Struggling with late payments? Read our guide to politely chasing overdue invoices here.
Scepticism in the UKBF community
The latest analysis echoes ongoing concerns about energy costs in UKBF’s small business community. The announcement of the Energy Bills Discount Scheme in January was met with scepticism, with users describing it as “near-negligible” and “fairly pointless”.Some UKBF users are already looking ahead to the Spring Budget, in the hope that there’s more small business support coming. As UKBF user BobzYourUncle put it in this thread:
“The post mortem [of the Energy Bills Discount Scheme] does not fill me with much optimism for the survival of small businesses I'm afraid,” they said.
“Unless the government mitigates this useless scheme with other meaningful help like VAT cuts or grants in April, hospitality businesses (especially independents) are very much buggered.”
