The latest UK budget has left many business owners feeling the chill as Chancellor Jeremy Hunt provided no additional energy support for commercial enterprises struggling with persistently high utility costs. Despite mounting pressure from industry groups, the government has maintained its position that businesses must navigate these challenges largely without further intervention.
“What we’re seeing is a calculated risk by the Treasury,” says Martin Reynolds, energy policy analyst at Cambridge Economic Research. “They’re betting that wholesale prices will stabilize enough that additional support schemes won’t be necessary. But that’s cold comfort for businesses operating on razor-thin margins right now.”
The decision comes at a particularly challenging time. According to data from the Office for National Statistics, nearly 62% of small and medium enterprises report energy costs as a significant concern, up from 38% in 2019. The Federation of Small Businesses estimates that the average commercial energy bill has increased by approximately 150% since pre-pandemic levels, even accounting for recent modest declines in wholesale prices.
Energy intensive industries have been hit particularly hard. Manufacturing, hospitality, and retail sectors continue to operate under extreme cost pressures, with many businesses reporting that energy now represents between 15-30% of their operational expenses, compared to historical averages of 8-12%.
“We were holding out hope for targeted relief measures,” says Eleanor Phillips, operations director at Midlands-based food processing company Harvest Foods. “Our energy costs are still nearly double what they were three years ago, and we’ve already implemented every efficiency measure possible. There’s no more fat to trim.”
The government has pointed to previous support schemes and general business rate relief as evidence of its commitment to helping businesses through the energy crisis. However, critics argue these measures are insufficient given the structural changes in the energy market that appear increasingly permanent rather than transitory.
The Financial Times recently reported that commercial energy contracts being offered now are averaging 65% higher than comparable pre-2021 terms, suggesting that the market has established a new baseline rather than returning to historical norms.
Industry groups including the Confederation of British Industry have called the budget a “missed opportunity” to address one of the most pressing challenges facing UK businesses. Their analysis suggests that without additional support, we could see up to 12,000 businesses at serious risk of closure or significant downsizing this year due primarily to energy cost pressures.
Perhaps most concerning is the regional dimension to this crisis. Data from Energy UK shows that businesses in Scotland, Wales, and Northern England are paying disproportionately higher energy costs due to regional network charges and less competitive supplier markets. This threatens to exacerbate existing regional economic disparities.
“The government seems to be operating under the assumption that energy markets will eventually self-correct,” notes Dr. Sarah Henshaw, economist at the University of Manchester’s Energy Policy Research Group. “But structural factors including geopolitical tensions, aging infrastructure, and the uneven pace of the green transition suggest high prices may be with us for years, not months.”
For small business owners like James Thornton, who runs a chain of bakeries in Yorkshire, the lack of additional support feels like abandonment. “We’ve already reduced operating hours, delayed investments, and even closed one location. What more can we do? The government talks about growth, but how can businesses grow when basic operating costs are unsustainable?”
The budget did include some modest green investment incentives that might help businesses reduce their energy consumption over the long term. However, the upfront capital requirements for many of these improvements remain prohibitive for smaller enterprises already in financial distress.
Looking ahead, the picture remains challenging. Bloomberg’s energy market analysts project that while wholesale prices may stabilize, they’re unlikely to return to 2019 levels anytime soon. The transition period will likely claim more business casualties without additional intervention.
For now, UK businesses face the stark reality of adapting to a fundamentally changed energy landscape with limited government support. As we move through 2024, the true impact of this policy decision will become clearer – measured in business closures, reduced investments, and potentially slower economic growth in the sectors most exposed to energy price volatility.
Whether the government’s bet pays off or backfires will likely have significant implications not just for the business community, but for the broader UK economic recovery and the government’s own political fortunes in the coming year.
