Energy firms urged to cut fixed tariffs as prices fall

Energy suppliers should renegotiate tariffs signed at sky-high prices last year or risk the future of more than 90,000 small businesses, a leading lobby group has warned.

The Federation of Small Businesses said that more than a tenth of small businesses had fixed their energy prices during the peak of the market in the second half of last year.

According to its latest survey more than a tenth of these, equivalent to 93,000 businesses, say that they could be forced to close, downsize or radically restructure after the removal of government support. The federation is calling on energy suppliers to allow companies locked into expensive deals to renegotiate to spread the high costs over a longer period, now that wholesale prices have fallen.

Tina McKenzie, policy chairwoman, said: “Having come out from a tough winter, this spring is supposed to be the beginning of economic recovery, but tens of thousands are still very much in survival mode because they are tied in to sky-high energy contracts. The least energy suppliers should do is to allow small businesses who signed up to fixed tariffs last year to blend and extend their energy contracts, so that their bills are closer to current market rates.”

The federation said that affected businesses included many in the retail and hospitality sectors and many that say that they have been unable to pass on cost increases to consumers already struggling with the cost of living crisis.

A government support scheme that was shielding companies from high prices ended in March and has been replaced by a far less generous scheme that, in the words of the federation, “changes support to pennies that do not touch the sides of huge bills” and has resulted in bills for some businesses quadrupling.

A spokesman for Energy UK, which represents big suppliers, said: “A subsequent fall in wholesale prices doesn’t alter the fact that with such fixed contracts the supplier will have bought the energy when costs were higher.”

He said that it was “in suppliers’ interests to ensure their customers can afford their bills” and that many were offering to renegotiate and extend contracts but it was “a commercial decision for the supplier concerned whether they can offer such flexibility”.