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CBI data highlights business anxiety at rising energy costs

960 640 Stuart O'Brien

New survey data from the CBI has revealed the extent to which businesses, like households, are concerned about soaring energy costs. More than two-thirds of firms expect their energy costs to increase over the next quarter.

A third of firms expect energy price rises to act as a barrier to growth, by stifling current or planned investment in energy efficiency or Net Zero measures.

With many firms, particularly Energy Intensive Industries and SMEs, already feeling the pinch, further energy price rises could push many viable businesses to the brink unless urgent action is taken to support them and their supply chains.

The says it will CBI will work with new ministers to explore all options for navigating the crisis and has proposed a 3-point plan that can be delivered at pace to support vulnerable consumers and businesses by targeting help where it is needed most, cutting costs, and kick-starting an energy efficiency drive that reduces demand and boosts the UK’s energy security:-

(1) To target support at those households and firms most in need, the UK Government should:

  • Urgently introduce targeted interventions for the most vulnerable households, through existing mechanisms like the Energy Bills Support Scheme
  • Instruct HMRC to replicate Time to Pay flexibility granted during the pandemic to take account of energy price rises
  • Launch a publicity drive around the recent extension to the Recovery Loan Scheme and commit to its expansion should evidence show this is needed; preparatory discussions with lenders should begin now, so future decisions can be taken at pace if the situation deteriorates and further help is needed

(2) To help keep costs down, the UK Government should:

  • Announce a business rates freeze now for 2023/24. This would head off a business-as-usual approach that would otherwise see rates increasing with inflation, and piling additional pressures on firms when they can least afford them. (Governments in devolved nations should do the same)

(3) To kick-start an energy efficiency drive to reduce demand, the UK Government should:

  • Roll out an ambitious programme to improve energy efficiency by providing people with upfront financial support to help retrofit household insulation (through a new ECO+ scheme)
  • Provide energy efficiency support for the most energy intensive sectors through an expansion to the Industrial Energy Transformation Fund

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.

“The guiding principles for any intervention must be to act at speed, and to target help at those households and firms that need it most.

“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.”

‘More nuclear power required’ to achieve net-zero emissions

960 640 Stuart O'Brien

Britain’s largest business group, the CBI, has called upon the Secretary of State for Business, Energy and Industrial Strategy to build new nuclear power stations and scale up carbon capture technology and infrastructure to reach the Government’s target of net-zero greenhouse gas emissions by 2050.

In a letter to the Rt Hon Greg Clark, the CBI sets out a series of priorities to decarbonise the UK economy and calls on the Government to use a forthcoming Energy White Paper to give more clarity on its vision.

The priorities include:

  • Progressing large-scale nuclear projects and supporting innovative nuclear technologies, such as Small Modular Reactors
  • Technology trials to determine the best, localised solutions to fully decarbonise heat in homes, offices and industrial processes
  • A clear mix of incentives for consumers and businesses to buy electric and hydrogen-powered vehicles, alongside comprehensive nationwide infrastructure ready for future demand
  • Rationalising the tax and business rates system to ensure green energy is encouraged, not penalised
  • Hosting COP 26 to showcase to the world the UK’s expertise in green technology and commitment to leading on climate change action

“Business is right behind the need for the UK to have a net-zero economy by 2050 and build on our global leadership in cutting greenhouse gas emissions,” said Rain Newton-Smith, CBI chief economist.

“To deliver the Government’s admirable net-zero policy by 2050, it is mission critical that business, politicians and the public work together to devise and make the necessary changes.

“Firms want to see a whole host of stable, long-term policies enacted – from building new nuclear power stations to scaling-up carbon capture and storage technology and infrastructure – that send markets a robust signal: the UK is open for green business, and is a world leader in tackling climate change.”

Image by Stefan Kuhn from Pixabay