Business groups warn against ‘cliff edge’ end to energy deal

THE six-month scheme that will give companies support from spiralling energy bills must not end on a “cliff edge”, business groups warned last night.

Emergency measures announced by the UK Government to shield households and companies from rocketing energy costs have been broadly welcomed by the business community.

But while the Energy Price Guarantee will mean the average household will pay no more than £2,500 a year on energy bills for the next two years, equivalent support for business and public sector organisations will be in place for just six months initially.

After that, “ongoing, focused support” will be given to “vulnerable industries”, with a review to be held in three months to “consider where this should be targeted to make sure those most in need get support.”

The Federation of Small Businesses in Scotland warned the six months of support must not be followed by a “cliff edge with businesses being hit even harder in the spring.”

Business groups urged ministers to provide more detail on how the support will work in practice. The measures will be funded by tens of billions of pounds of government borrowing, with reports suggesting the scheme could cost as much as £150 billion.

Andrew McRae, Scotland policy chair at the FSB, said: “It will be a huge relief for many hard-pressed small businesses that the Prime Minister has answered FSB calls and help is on the way.

“That said, while the headline measures are to be warmly welcomed, we do need more detail and we’ll be working with the new government to clarify what happens next.

“The six-month lifeline to get businesses through the winter is vital, but this must not result in a cliff edge with businesses being hit even harder in the spring. Our recent energy report demonstrates the stark reality that a higher proportion of Scottish businesses have seen their bills rise higher than those in the wider UK.”

Alongside the emergency financial support, the UK Government said it would take action to accelerate domestic energy supply.

A new oil and gas licensing round which is expected to lead to more than 100 new licences for North Sea extraction could be launched as early as next week, and the moratorium on shall gas production will be lifted in England. The Government reaffirmed plans to ramp up its nuclear capacity, and a commitment was given to undertake fundamental reform to the structure and regulation of the energy market.

While the UK Government supports the extraction of more fossil fuels as part of its drive to boost energy security, the Confederation of British Industry (CBI) said the current crisis must not detract from the country’s net-zero ambitions.

CBI economist Rain Newton-Smith said: “The devil will now be in the detail to come. Government, businesses and energy suppliers must work together to ensure the support pledged gets to firms quickly.

“This energy crisis is not impacting all firms equally, so it’s encouraging that more targeted measures are to be introduced for businesses in sectors that are most at risk.

“Despite these tough times, business remains in no doubt that doubling down on net zero is the route out of this crisis, the way we grow our economy and the way we make ourselves more energy resilient for the future.”

Baroness Ruby McGregor-Smith, president of British Chambers of Commerce, said the UK “must not abandon our net zero targets” and called for action to “support business with the switch to more energy-efficient technologies and practices”.

Baroness McGregor-Smith added that utilising the UK’s oil and gas reserves during the energy transition was a “sensible path to take, provided this does not jeopardise our net-zero targets.”

Meanwhile, groups representing the hospitality and tourism trade in Scotland reinforced calls for a cut in value-added tax, and for relief from business rates.

Colin Wilkinson, managing director of the Scottish Licensed Trade Association, said: “The current situation, for many businesses, is worse than the pandemic.”

Marc Crothall, chief executive of the Scottish Tourism Alliance, said a VAT cut, and deferral of Covid business interruption and bounce back loan payments were among fiscal levers that would “significantly ease the burden for businesses in our sector” if they were applied immediately.

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