Suppliers urged to shrink costly energy deals

Over 90,000 businesses face closure or downsizing, being stuck on exorbitant fixed-price energy deals compared to current market prices

Suppliers have been urged to renegotiate costly energy deals with thousands of small businesses.

Tens of thousands of companies will face closure unless bills are cut to reflect the drop in wholesale energy prices, warns trade body the Federation of Small Businesses.

More than a tenth of small companies signed fixed-contract energy deals in the second half of last year when prices were at their peak.

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But since then, wholesale natural gas prices have fallen by more than 80 per cent, and the Government has sharply reduced support for businesses since March – a move which, in the words of the federation, “changes support to pennies that do not touch the sides of huge bills” – despite many companies being stuck on higher-cost fixed deals.

Energy bills for some businesses have quadrupled since the less generous scheme came into effect.

Ninety-three thousand businesses could be forced to close, downsize or radically restructure because of the size of their energy bills, says the FSB.

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The FSB would like to see any small business that signed a contract in the second half of last year be allowed to renegotiate its energy supply contract if the price it is paying is higher than during the winter months, when more generous Government support was available.

Tina McKenzie, FSB policy chair, said that tens of thousands are in “survival mode because they are tied to sky-high energy contracts … giving small firms a way out of last year’s market peak rates will accelerate the progress to recovery”.

UK energy prices peaked at £6 a therm in August last year following the Russian invasion of Ukraine; that price fell to 80p a therm for delivery next month.

Contracts for delivery in winter 2023/24 are higher but still pegged at £1 a therm.

Energy UK, the industry body, told the Financial Times that its members were already “offering to renegotiate and extend existing contracts where this is possible”, while regulator Ofgem recently wrote to suppliers asking them “to show flexibility”.

The problem is that suppliers themselves pre-bought supplies at the-then market rate on behalf of these fixed-contract customers.

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Tim Adler

Tim Adler is group editor of Small Business, Growth Business and Information Age. He is a former commissioning editor at the Daily Telegraph, who has written for the Financial Times, The Times and the...