Labour MP demands government supports small businesses with skyrocketing energy bills

The government must act to help small businesses and charities with spiralling energy costs, a Labour Party MP has said.

Olivia Blake, MP for Sheffield Hallam, wrote to the business secretary Kwasi Kwarteng urging him to bring forward measures to keep small businesses in her constituency and across the country afloat this winter.

Blake wrote: “Over the past few months, I have been contacted by a number of small businesses and charities in my constituency who are struggling to afford rising energy prices and are extremely worried about the future of their organisations.

“Constituents have reported their businesses’ energy bills rising from hundreds to thousands of pounds per month. In the most extreme cases, I have heard of hospitality venues seeing increases of over 600%. This is unsustainable, and coupled with the drop in customers some are also experiencing, will mean that many are forced to close.

The letter comes after small businesses reported seeing tenfold increases in their bills. Costs for SMEs have reportedly nearly doubled in the three months to June, and research from small business insurance provider Simply Business found half have been forced to raise their prices. Many small companies and charities are facing the prospect of laying off staff or closing their doors for good.

“So far the government has completely ignored the stress charities and small businesses are under,” Blake wrote in the letter. “This cannot continue. I urge you to please introduce urgent measures to end this crisis, ensure energy is affordable and help keep small businesses in my constituency and across the country afloat.”

Labour leader Keir Starmer recently announced he would freeze the energy price cap, so the average household bill would not hit about £3,600 a year as forecast if it were increased.

But the energy price cap does not cover businesses. The Competition and Markets Authority (CMA) introduced the cap in 2019 after it found some homes were being charged excessive prices. It was not applied to businesses because the CMA did not find evidence of this happening in the business sector at the time.

Chancellor Nadhim Zahawi is reportedly looking at repurposing Covid schemes to help small businesses through the winter. Officials are looking at funding mechanisms that helped firms in the hospitality, leisure and tourism sectors survive lockdowns, including grants, and VAT and business rates holidays. 

However, support would be conditional on the new prime minister’s appetite for more borrowing. Tory leadership candidate Liz Truss and Kwarteng, expected to be her chancellor if she becomes the next prime minister, have tried to assure people that “help is coming”.

In a comment, Blake reiterated the need for the government to act urgently.

“First, small businesses and charities had to weather the storm of the pandemic. Now, with barely any time to recover, business owners are opening bills which have increased by as much as 600% – at a time when their customers are tightening belts. 

“Charities that gave so much during the Covid emergency are being priced out of supporting our communities when we need them most. The cost of living and doing business is too high. We need urgent action to address the energy bills crisis but we have a government that’s missing in action.”

The Federation of Small Business is also concerned small companies could be left in the cold. An FSB spokesperson told the Big Issue:

“First and foremost, we need direct help for small businesses with bills. This could be done via a rebate through the business rates system for those who pay business rates, accompanied by a discretionary pot of money to be issued by local authorities. It could alternatively be directly applied to energy bills.”

“There should be a temporary reduction of taxes on energy. For example, the higher-threshold rate of VAT could be reduced from 20% to 5%. The lower threshold and domestic rate of VAT could be reduced from 5% to 0%. A VAT reduction should also help combat inflation.

“Finally, we need to extend the price cap to smaller businesses. The smallest businesses are more akin to domestic customers when deciding on their energy provider, ranging from lack of expertise in purchasing energy to poor bargaining power.”

Campaigners were also critical of the government’s lack of support for SMEs. ​​An Enough is Enough spokesperson said: “The government’s failure to tackle skyrocketing energy bills is nothing short of scandalous.”