Energy Supply Market: Small Businesses

Wera Hobhouse Excerpts

Wednesday 13th September 2023 Westminster Hall

[Wera Hobhouse (Bath) (LD)]

It is a pleasure, Ms Fovargue, to serve with you in the Chair. I congratulate the hon. Member for Aberconwy (Robin Millar) on securing the debate.

Bath’s small businesses are the backbone of our local economy. They create jobs and are the heart of our local community. In recent years, SMEs have had to deal with the uncertainty of Brexit, the shock of covid and then the energy crisis. What they need is a supportive Government to help them through tough times, but many of our small businesses feel badly let down.

Several companies in my constituency have expressed disappointment that the Government have decided to remove energy support. One pub’s energy bill went up by £35,000. Had the energy bill support scheme that was in place until April continued, the bill would have been reduced by £30,000. However, the Chancellor’s decision to replace that scheme meant that the pub now receives only £3,000. That big gap in support is putting small businesses in my constituency at risk of closing.

Politics is about choices. The Government chose to prioritise cutting tax for big banks over helping small businesses in my constituency. Under Liberal Democrat proposals, small and medium-sized businesses would have been offered Government grants covering 80% of the increase in their energy bills for one year, up to a maximum of £50,000.

As we move into winter, the Government must step up. Suppliers, such as E.ON, have noted that some companies will become unsustainable without Government support, as 15% of small hospitality businesses fear that they might collapse in the next 12 months, with 96% of them saying that energy prices are a significant contributor. Local firms that agreed to new energy contracts in the second half of 2022, have been paying premium prices for their energy since April. That is absurd; they have not benefited from the drop in wholesale prices.

I agree with UKHospitality that the Government must urge suppliers to work with business to resolve the issue. One potential solution from the Federation of Small Businesses is a blend and extend scheme. Blend and extend contracts enable customers to take advantage of the lower wholesale cost under their current contracts: the original contract is extended by a further 12 or 14 months, for example, and today’s rates are then blended with the original contract rates. That will reduce a firm’s energy bill and help to improve its cash flow.

Additionally, the Government must accelerate the review of electricity market arrangements to ensure that households and businesses benefit from lower-cost renewables. That should involve decoupling electricity from wholesale gas prices. Renewables are now the cheapest source of energy, but their price is artificially linked to expensive natural gas. It is incomprehensible that businesses were unable to benefit from the lower cost of renewable energy last winter.

The Government could also reduce energy bills by decreasing demand. The UK has some of the leakiest buildings in Europe. The Government must give a strong commitment to businesses to improve their energy efficiency. We Liberal Democrats will continue to push the Government to do more, so that businesses become more energy-efficient.

The Federation of Small Businesses suggests a Help to Green scheme to provide direct financial support and advice to companies. That would include a grant of up to £5,000 to allow SMEs to invest in energy efficiency or microgeneration. The independent review of net zero also championed the idea. It would be interesting to know whether the Government have considered it.

Winter is fast approaching. We need the Government to provide the short-term help that small businesses need now and the long-term solutions to stabilise energy costs. The energy crisis has the potential to kill many small businesses in my constituency. We need a Government who are willing to help small businesses to provide the goods and services that are so crucial to our local communities.