Tory energy price cap could lead to crippling costs for UK businesses

The proposed government crackdown on energy prices is unlikely to combat a steep increase in energy costs that are hampering small and medium-sized businesses, according to a new study. 

Prime Minister Theresa May earlier this month confirmed that the Conservative manifesto will include plans for price controls on energy bills. She claims the voter-friendly intervention will protect around 17 million families on standard variable tariffs from being exploited with sudden and unjustified increases in bills.

But a new analysis by energy consultancy Utilitywise, seen by The Independent, shows that electricity costs for SMEs have already increased by 43 per cent since 2010 and that such caps might introduce even more crippling costs for companies.

Utilitywise, which advises some 40,000 businesses across the UK, says that the Tories’ expected plans would hinder competition in the commercial sector, in turn leading to even higher prices for the SMEs already struggling to cope with ballooning prices. 

“These spiralling costs are clearly very damaging for the UK economy, as small business owners are already under a lot of pressure from increased business rates and economic uncertainty with Brexit and now another general election,” Jon Ferris, strategy director at Utilitywise told The Independent.

According to the Department for Business, Energy and Industrial Strategy, SMEs already spend £15bn a year on energy.

Mr Ferris said energy bills represent one of the top three costs for businesses, along with people and property, and called for the future government to ensure that any costs associated with capping energy costs would not fall on SMEs.

“By introducing a cap for the domestic market, and making energy intensive industries exempt from policy costs, the only sector left to pick up the bill is small businesses, who are caught in the middle. We feel that it’s about time politicians address this problem and help our small business owners, who are the lifeblood of the UK economy,” Mr Ferris said.

“The political disruption, lack of long-term government vision and lack of education that we’ve seen in recent years has meant that SMEs are missing these opportunities,” he added.

Earlier this month, members of the UK energy industry criticised the Tory manifesto pledge to cap household bills, also saying it could hinder competition, pushing up energy prices and ultimately leaving British consumers worse off.

Lawrence Slade, chief executive of the trade association body Energy UK, also said the plans could put “billions of investment” into the UK at risk.

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He said: “Intervening further would undermine so many of the positive changes that we are seeing in the retail market. It would be giving up on competition, and at a time when we need engaged consumers more than ever.

“Intervention on this scale will additionally create huge uncertainty around government intentions, potentially putting at risk the billions in investment and jobs needed to renew our energy system.”

British Gas owner Centrica and supplier E.on have both said reduced competition could lead to higher prices.

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