The CBI has urged the government to extend the energy bill relief scheme for significant energy users beyond the end of March 2023 and provide additional cashflow support for vulnerable businesses, especially SMEs.

It says that the scheme – in operation since September – has been crucial in shielding business from rising wholesale gas and electricity costs after Russia’s invasion of Ukraine. The measure has protected firms from major financial losses, potentially saving many from collapse.

The Government has committed to providing some support from April onwards, but the CBI says firms need to know if they will or will not qualify before the end of the year in order to help them to plan ahead.

While wholesale gas and electricity prices have fallen back from their previous spikes, they are expected to remain historically high in the coming year – a CBI survey of nearly 700 businesses shows that firms expect their energy costs to more than double (151%) if government support is no longer available from April 2023. It warns that the most vulnerable businesses, especially SMEs, still need to be protected from April 2023 onwards, and has outlined several policy options that it believes the government should consider.

Among the CBI’s suggestions are direct support to help vulnerable firms pay their energy bills, going behind the definition of energy-intensive industries to include other sectors such as automotive and food and drink manufacturers.

It says the government should also provide additional cashflow support to help companies adjust to the higher energy costs, such as instructing HMRC to replicate ‘time to pay’ flexibilities granted during the pandemic. It also urges new policy initiatives to boost incentives for business energy investments which it believes could encourage firms to invest in energy efficiency.

Matthew Fell, chief policy director at the CBI, said: “The energy bill relief scheme has been crucial in cushioning firms from spiralling energy costs. The CBI understands and supports the government’s decision to target the scheme from April 2023 onwards. The cost is simply too great to continue indefinitely, and the need is not evenly distributed among all businesses. Any extension must be aimed at firms that use the most energy, just as many of our European counterparts have already committed to doing. And businesses need to know before the year is out if they qualify or not.

“We must also take heed of the lessons from the pandemic, where providing additional cashflow support, especially to SMEs, was critical to seeing businesses through this period. Allowing businesses to defer energy bills if needed and providing grant funding through local authorities can play key roles in 2023.”

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