An industry boss is hopeful the new price cap on energy bills could save many businesses after one in six were planning to “‘shrink, shut or sell” in the next month.
Ruth McElroy from the Federation of Small Businesses Scotland has said over 96% of businesses in Scotland are concerned about their energy bills.
Over 49% are “extremely concerned” and have made plans to reduce or shut their businesses in the next month.
However, she said the announcement from the UK Government of a price cap on energy prices for businesses could help save firms in crisis.
The outlined support is to help companies, charities and public sector organisations for six months from October 1.
It follows after many local businesses have had to close or shrink after struggling with the increasing costs.
Nearly half of Scottish small businesses are ‘extremely’ concerned about energy bills
The support will put a cap on energy prices for businesses that would half the rates they pay this winter joining household energy bills which will be capped at £2,500 from October.
The “supported wholesale price” is expected to be £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas.
Ms McElroy from the Federation of Small Businesses Scotland, said it was a much needed change in approach from the government.
Speaking on GMS this morning, Ms McElroy said: “We’re very happy about what we’ve seen so far.
“The government has recognised the case that we’ve been making for some time now that it is appropriate and right to treat small businesses as though they are on the same footing or similar footing at least, to household consumers rather than big corporate.
“That they have different needs. We are very hopeful about the introduction of a price cap although have some questions about how that will practically roll out.”
In their most recent report published a few weeks ago, she said 96% of businesses had some level of concern about their energy bills will 49% of them in Scotland saying they were “extremely concerned”.
Carrying out this research throughout the whole of the UK, they found that the level of concern and the rise in prices were consistently worse in Scotland.
Ministers have said firms, schools, hospitals, charities and other non-domestic consumers will be covered by the scheme.
Costs have increased by up to 600%
Ms McElroy added: “It is a practical reality of life that it is colder, darker and wetter up here but also we do have a significant amount of businesses that exist, as you point out, on off grid heating oil to power their businesses.
“It’s important to remember in all this that we have just come out of two years of crisis with the Covid pandemic so certainly this is an extremely unwelcome additional burden.
“Businesses have already depleted a lot of the reserves they had built up before the pandemic.
“We’re seeing members having costs increases of 400-600% which obviously is a huge amount of money that they’re having to find.
“So we’re seeing that one in six businesses have recently told us that they plan to either shrink, shut or sell within the next month or they are seriously considering it.”
Hebrides hotel owner would have to raise cheapest room prices by £305
She said this could have an impact on “potentially thousands of jobs” especially in rural communities where local businesses are the “cornerstones of their economies”.
Ms McElroy added: “If the local shop in a small village in one of our rural communities disappears, that leaves a massive hole that communities will struggle to fill which will have a significant impact on everyday lives.”
“We’re hopeful. We’re making the case that help should come as soon as humanly possible.”
Some business owners have already said the six-month review is not practical.
Guy Adams owner of Isle of Barra Beach Hotel told Radio 4 he has been quoted the “equivalent of 377.66% increase” for his energy bills.
He said: “It would probably most likely have finished us off simply because it would not just have been that one bill, all our suppliers would have been getting roughly the same.
“At present, our cheapest room rate is at £110 a night. We would have had to raise that to £415 per night. Literally that’s the cheapest rate and there just aren’t the people who would have paid that sort of money.
“The government isn’t allowing for us. We’re a seasonal hotel and we close at the end of this month and then we open again in May.
Calls on the Scottish Government to do more
“We are now getting people asking us for our prices to do bookings for May next year. Am I to work on the fact that this will continue or am I to work on the fact that it won’t continue?
“In which case am I still in the absolutely impossible case as to how do I do quotes to agents and people wanting to book.
“I think the fact that it is going to be reviewed in six months is not practical and also it will also take the rates up considerably more than most people are prepared to pay.
“They’ll be paying rates that they would expect to pay in London they will not be paying rates that they expect to pay in the Hebrides.”
Meanwhile, business leaders in Scotland have called on Nicola Sturgeon to work better with businesses claiming there is not enough dialogue with Scottish Ministers.
The head of the Confederation of the British Industry, Tony Danker, told the Scotsman he had “yet to hear” appropriate measures to help firms. He said they needed to show more concern for businesses struggling as they had for households.
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