Energy and fuel costs hinder SME growth in 2023 despite government support

With Ofgem announcing the new consumer energy price cap at the start of January, research from Simply Asset Finance reveals the impact of rising energy prices on UK SMEs in 2023, which have been unable to benefit from capped rates.

According to its research, soaring energy and fuel prices have hindered the growth of SMEs in the UK over the past year, as one in five (22%) reported having to delay significant business investments as a result.

These bills are so high, that the average SME pays £64,383.10 per year to cover its energy and fuel usage.

While nearly a fifth (19%) experienced no significant impact on their business as a result of the rising cost of energy and fuel, the same number said they had to downsize and cut costs (19%). 17% also said they had to pause their business for an extended period of time.

Despite the launch of the government Energy Bill Discount Scheme (EBDS) in April 2023 – which provides businesses with a discount to their energy bills – Simply’s research finds that well over half (57%) of SMEs said they were unaware of the financial support available to them.

This is particularly concerning for companies in Energy and Trade intensive industries (ETII), which are required to apply for additional support and may be unaware of the potential savings available.

With the EBDS coming to an end on 31 March 2024, the research raises concerns for those SMEs relying on the scheme and their future growth prospects.

Mike Randall (pictured), CEO at Simply Asset Finance, said: “The New Year often brings with it hopes for a fresh start and ambitions for the future, but SMEs across the UK are still reeling from the challenges of the past year. On top of rising inflation and interest rates, businesses have been subject to an energy crisis which is still hindering the growth of over a fifth of UK firms to this day.”

“With the year ahead holding much potential for SMEs in terms of UK recovery, we cannot ignore the challenges that are still inhibiting their growth. Government support has, until now, been crucial support for many SMEs who may have otherwise faltered over the past few years. However, an end to the EBDS, without an alternative replacement, will be a worrying prospect for many firms still facing surging energy and fuel costs.

“With the Autumn Statement offering little in the way of future support for SMEs, it is imperative that the government considers some form of continuity in the upcoming Spring Statement. In parallel, it will fall to lenders to bolster these firms in helping them identify how they can still achieve their business goals and show tailored flexibility in helping them move to a position of growth.”