New year, same old problems for small firms. The new government Energy Bills Discount Scheme will see energy bill support for business slashed, meaning bigger bills and more uncertainty. How can small companies manage the costs?

The sharp reduction in energy subsidies comes as little surprise – it was clearly signposted by the Chancellor in the Autumn Statement – but it is still an unwelcome way to the start the year for small businesses, which face yet another 12 months of unprecedented pressure on cash flow and capital resources.

Citing the high cost of the original scheme as the main reason for the change in policy, under the new government initiative that will launch in April, the current cap on costs will be replaced by a discount on wholesale energy prices. Larger, more energy-intensive firms will get the most support under the new rules, with smaller companies getting the thin end of the wedge.

As expected, the move has drawn significant criticism from the small business sector, further pushing down optimism and bringing gloomy forecasts coming from key bodies. The Federation of Small Businesses has estimated that many smaller firms will receive no more than £50 in future assistance through the new scheme, while a business lobby group has warned that as much as 25% of small businesses could fail as a result of the cut to support for gas and electricity bills.

High energy costs and how alternative finance can help

The announcement of the new Energy Bills Discount Scheme comes as the business sector steels itself for a prolonged recession and battles with climbing interest rates and rising inflation, with the Bank of England warning that high levels will persist longer than expected. As this backdrop and with the government seemingly setting the tone for the year with its new policy, the focus on safeguarding cash flow and managing costs will be sharper than ever for small firms. This is where alternative finance can help.

In the wake of prolonged caution from traditional lenders, which is an issue that has returned during the pandemic and amid challenging market conditions, services such as invoice finance, asset finance and peer-to-peer lending are proving a vital source of capital for small businesses, not least because these facilities offer a more easily accessible and personalised approach to lending.

The prominent inclusion of alternative lending in the government’s headline emergency support schemes in 2022, including the Recovery Loan Scheme, has helped cement the reputation of alternative finance in the business sector.

Managing energy bills and small firm finance options

The news that support for gas and electricity bills is set to be reduced sharply from April is blow for small businesses already under severe pressure; firms will have to dig even deeper to keep their heads above water in what is set to yet another challenging year. Key surviving and targeting growth amid such conditions is ensuring access to finance. As such, it is vital that business owners are aware of all the finance options available, including the services of alternative lenders.

To find out more about A&T Business Associates services, contact Steve Bowles on 01903 602211 or steve.bowles@atbusinessassociates.co.uk.