UK Firms See Energy Costs Doubling When Government Support Ends

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(Bloomberg) — UK businesses expect energy costs to more than double next year when a government support package comes to an end.

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A survey of 700 firms by the Confederation of British Industry shows companies are bracing for a jump in bills when the government winds up assistance at the end of March, leaving them exposed to rising wholesale costs.

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“The high cost of energy is dominating the decisions that businesses are making each and every day,” Matthew Fell, the CBI’s chief policy director, said Thursday. “There are no easy answers in all this, but the government will have to keep supporting the most vulnerable firms,” particularly small and medium-sized businesses.

Companies’ energy bills could soar more than 150% once the state help is withdrawn, according to the CBI survey. The Treasury’s multibillion-pound package for businesses has capped wholesale costs since October, but only a few energy-intensive industries will continue to receive the support from April. Government officials have committed to providing some form of assistance after that, but firms don’t yet know whether they’ll qualify, the CBI said.

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Along with the Energy Bill Relief Scheme, the government is funding a £6 billion ($7.3 billion) program to improve energy efficiency, seeing it as a way to reduce bills and curb reliance on imports. Yet past energy efficiency campaigns have achieved little success, and rarely cut companies’ costs immediately.

The UK is among countries across Europe grappling with surging energy prices after Russia’s invasion of Ukraine squeezed gas supplies. Treasury support has shielded firms from major financial losses and saved many from collapse, prompting fears that its withdrawal will leave some in an untenable position.