Businesses in Coventry and Warwickshire will be ‘squeezed even tighter’ by the Government’s decision to cut energy support for firms from April.
Corin Crane, the chief executive of the Coventry and Warwickshire Chamber of Commerce, said discounting wholesale prices when costs are high rather than costs being capped, as per the current scheme, would be a further blow to firms in the region.
He said a longer-term strategy is needed, including incentives for businesses to invest in renewable sources of energy.
Crane said: “We have been calling for the Government to give firms clarity on what support will be available once the current package runs out in March. We welcome the announcement and the fact it will last for a year, but the drop-in support means that businesses across our region will be squeezed even tighter.
“Firms are facing challenges left, right and centre and another rise in costs at the start of the next financial year will hit them hard.
“We understand that the Government has to balance public finances but we also need businesses to have confidence that they can invest and grow over the short, medium and long term.
“Equally, we need a strategy that moves the UK to more renewable and sustainable forms of energy and incentivises businesses that want to invest in those areas. Not only would it bring longer term stability to the energy market, the transition will provide an economic boost.
“It’s vitally important, too, that businesses are supported in reducing their energy consumption to alleviate some of the rising costs.
“We do welcome the substantially higher level of support which will be provided to businesses in sectors identified as being the most energy and trade-intensive – which is something members of our Manufacturing, Automotive, Construction & Engineering (MACE) group have consistently called for since the dramatic rise in prices at the beginning of last year caused by global events.
“It has been noted by our members that the UK Government is taking a huge gamble on energy and gas prices staying low. If they increase to the levels we saw in the summer, this £5.5billon pound support package will be wiped out far too fast.”
British Chambers of Commerce Director General Shevaun Haviland said: “Despite Government efforts, an 85 per cent drop in the financial envelope of support will fall short for thousands of UK businesses who are seriously struggling.
“Many businesses have been fighting for their survival for months, and rising energy costs have fast become the tipping point. While we welcome the 12-month duration of this package, its value is nowhere near far enough and means that for some firms, energy will now be a cost too far.
“We understand Government must consider public finances, but any support package, short or long term, should be right for business - otherwise we’re going around in circles.
“The wrong type of support will continue to see business confidence deplete and Government having to revisit its package.
“This is not about giving a handout to failing firms. It is about investing in British businesses, many of whom are confident about the strength of their orderbooks despite being hammered by eye-watering energy costs.
“Our economy will not be able to grow if our businesses are in decline.
“Alongside an energy support package, we need an energy support strategy to get businesses on the right track to longer term efficiency.”
The British Chambers of Commerce has also urged the Government to prioritise three areas to improve the market, which are:
Increase OFGEM’s powers: Ensure effective competition in the business energy market for non-domestic contracts by extending OFGEM’s regulatory powers to guarantee businesses access competitive fixed rate contracts, and energy providers move swiftly to pass on wholesale price reductions.
Energy production: Government to bring forward ambitious plans to enable more renewable and sustainable energy production across the UK.
National energy saving campaign: Government should launch a national campaign with support initiatives for businesses to drive down current consumption through energy efficiency measures, such as green grants and tax incentives.
Haviland added: “It is a critical year for the UK economy and with the right focussed support, businesses can help turn the economy around and get the UK back to growth and prosperity.”