Two thirds of firms face price hikes in next quarter

Almost a third of businesses anticipate energy costs to increase by more than 30% in the next three months, according to the CBI.

Data from a new survey carried out by the flagship business body revealed 69% of firms expect their energy costs to increase in the next quarter, with nearly a third anticipating rises of more than 30%.

Around one in three say they do not expect to pass on additional energy costs.

However 30% of those surveyed say energy price rises are likely to negatively impact current or planned investment in measures to meet net zero.

The CBI has warned that many viable businesses could be pushed to the brink unless urgent action is taken to support them and their supply chains.

It has today (24 August) proposed a three point plan, which can be delivered quickly, to support vulnerable consumers and businesses by targeting help where it is needed most,

The CBI says the government should introduce targeted interventions for the most vulnerable households, through existing mechanisms like the Energy Bills Support Scheme.

Ministers should also instruct HMRC to replicate the ‘Time to Pay’ flexibility granted during the pandemic to take account of energy price rises.

And they should commit to an expansion of the Recovery Loan Scheme, if needed, and begin preparatory discussions with lenders in case the situation deteriorates and further help is required.

To help keep firms’ costs down, the UK government should immediately announce a business rates freeze, for 2023/24.

In addition, the government should boost energy efficiency by providing people with upfront financial support to help retrofit household insulation through an extension of the ECO scheme.

And ministers should provide energy efficiency support for the most energy intensive sectors through an expansion of the Industrial Energy Transformation Fund.

The CBI’s call follows the publication of a letter to business secretary Kwasi Kwarteng by Bill Bullen, chief executive of Utilita, saying that an energy price freeze is “essential” for businesses. Unless this is introduced, Bullen writes that increased business failures are “quite likely”.

Matthew Fell, CBI chief policy director, said: “The impact of soaring energy prices on households is going to have serious consequences, not just for individuals but for the wider economy.

“While helping struggling consumers remains the number one priority, we can’t afford to lose sight of the fact that many viable businesses are under pressure and could easily tip into distress without action.

“Firms aren’t asking for a handout. But they do need autumn to be the moment that government grips the energy cost crisis. Decisive action now will give firms headroom on cashflow and prevent a short-term crunch becoming a longer-term crisis.

“With firms under pressure not to pass on rising costs, there is a risk that vital business investment is paused or halted entirely. That in turn could pose a real threat to the UK’s economic recovery and net zero transition.”

These issues will be discussed in more depth at the Utility Week Forum which will take place in London on 8-9 November. Find out more here.