Established small and medium businesses have expressed concern about their prospects ahead of the government announcing it is set to reduce the amount of energy relief it is providing when the existing programme comes to an end in March.
According to a survey by Allica Bank of 150 established business owners (those running firms with between 10 and 100 employees), 69% said the current plan doesn’t last long enough to have a lasting effect.
The news that the support will instead be decreased will come as a significant blow to this critical segment, which makes up more than 30% of business turnover and jobs in the UK. Some 12% of the business owners Allica polled described the support as a ‘lifeline’, while two-thirds said it is a valuable resource as their business grapples with an uncertain economic environment.
The survey highlighted, too, that energy costs are only one part of the challenging picture for businesses, with rising interest rates being labelled a major concern by nine out of every 10 businesses (93%), and experts predicting the Bank of England will continue to increase the Base Rate as the year goes on.
Businesses are also battling with other rising costs, such as inflation, the supply chain crisis and labour shortages. Construction raw material prices, for example, have risen by 22% in the last year, with a Department for Business, Energy & Industrial Strategy report suggesting that 51% of construction firms have been obliged to increase their own prices as a result. More than four in ten (43%) of business owners polled by Allica identified the supply chain crisis as their top challenge currently.
Conrad Ford, Chief Product and Strategy Officer at Allica Bank, says the government has the unenviable task of balancing the needs of businesses with affordability in a period of heightened public spending:
“The government’s energy relief package was a swift response that recognised and acted upon the ongoing energy crisis, making a real difference for businesses across the country. However, as we hear the news that this relief is set to be reduced, many businesses are understandably worried about how this is going to affect their plans for 2023 – especially as many will have hoped to finally focus again on growth after the pandemic.
“Banks also have a responsibility to provide businesses with support to face the challenging economic period ahead. Some 83% of the businesses we surveyed are calling out for the banks to give more of a lifeline - either with funding or more communication and expertise. Specialist business banks that focus on relationship banking are ideally placed to deliver this.”