Rising Energy Bills put SMEs at Risk, says ex-Chancellor Alistair Darling
Meanwhile, the British Chambers of Commerce calls for ‘COVID-style’ bailouts for SMEs
In recent articles we have reported on the effect that rapidly increasing energy prices, especially gas, and rising inflation in general will have on SMEs. Smaller companies, in particular, can very quickly go from financial underperformance to stress and crisis very quickly. Many thousands of companies that needed a strong bounce back from Covid-19 have had their recoveries “pinched off” by the current crisis. In this article we highlight comments from the British Chambers of Commerce and former Chancellor of the Exchequer, Alistair Darling who make plain the scale of the problem faced by business.
The British Chambers of Commerce say SMEs will need c.£5,000 each to afford energy bills over the winter
There is no price cap for the energy supplied to businesses which means that prices could go out of control.
A proposal from the British Chambers of Commerce (BCC) suggests that the government should introduce COVID-style grants for SMEs to help them get through the winter. In a letter to the Government, BCC’s Director General Shevaun Haviland, urged ministers to provide grants to struggling SMEs so they can ‘sustain their businesses during these challenging times’.
The BCC estimates that SMEs are likely to need, on average, c.£5,000 each so that they can afford to pay their energy bills this winter. Given that there are c.4.5 million SMEs in the UK, that equates to £23 billion of government support. The BCC is also calling for a temporary cut in VAT to 5% to reduce energy costs for businesses and more powers to the energy regulatory Ofgem, as part of a wider range of measures to help businesses
Alistair Darling warns that rising energy bills could put small firms at risk
The Chancellor who served under Gordon Brown during the 2008/09 credit crunch, Alistair Darling, has warned that soaring energy costs could be the “straw that finally breaks the camel’s back” for small businesses that have already been hit by the pandemic. He went on to suggest that “bold action” from the Government was needed and that ministers needed to offer more support, that “You’ve got to announce it now” ,and that it must be “far more substantial” than the help already in place.
It remains to be seen what additional help the Government will give businesses, but those already under threat must take advice quickly
It seems that the current energy crisis, and all its implications and ramifications, is analogous to the Covid crisis for businesses, where, ultimately, the Government did take significant action.
Back in March 2020, just as the Covid-19 Pandemic was starting to bite, Antony Batty, one of our Licenced Insolvency Practitioners had this to say:
“We have been talking to many Companies, across a range of sectors whose business has disappeared over night as a result of the Coronavirus Pandemic, yet until a couple of weeks ago these were successful Companies which were profitable and many were growing. Now they face overhead bills but no income.
The UK cannot afford to lose these Companies. We are Insolvency Practitioners and our team of specialists want to help as many companies survive as possible – but how?”
Our advice, now as back in March 2022, is take action if you are worried and talk to an Insolvency Practitioner for help and advice. Some key things that can be done quickly, whilst we wait to see what the Government is going to do, include:
- Understand and work out exactly what your committed cash flow is.
- Talk to your Lenders and Asset Finance companies about possible repayment holidays.
- Talk to your landlord about a rent holiday. It is not in your landlord’s interests to have empty premises at this time.
- And also make sure you know what your duties are if you are a company director. It is vital that these statutory duties are carried out correctly, especially when a company is in financial difficulties.
Contact our Licensed Insolvency Practitioners for help and advice
These are unprecedented times for businesses and people everywhere.
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