Five of Britain’s leading business groups have called on the UK government to take urgent and decisive actions to help tackle the energy crisis with a warning that failure to act will result in lower investment, an increase in poverty and the risk of an inflationary spiral.
In a letter to Rishi Sunak, the heads of the CBI, the British Chambers of Commerce, the Institute of Directors, Make UK and the Federation of Small Businesses said “rocketing” domestic and business bills would put the brake on economic recovery.
“As a collection of business groups, we are writing to ask you to act urgently and decisively to support consumers with spiraling bills and help business manage inflated costs over the medium term,” the letter said.
The letter said businesses had also been affected by steep rises in their energy bills, with further increases looming as fixed tariff contracts came to an end.
“It will hurt low-income households most acutely, but these cost increases will have knock-on impacts throughout the economy,” the letter said. “We therefore urge [the] government to take action to mitigate rising domestic bills and support the most vulnerable.”
The letter further points out how small and medium-sized businesses are the most at risk and companies will soon be left with little other choice than to pass costs on to their customers, adding further inflationary pressure.
Sunak and the business secretary, Kwasi Kwarteng, have been working on possible measures to soften the impact of an expected rise in energy bills of nearly 50 per cent – amounting to £600 a year for the average household – when the price cap is lifted in April.
Ofgem, the energy regulator, will announce the new price cap early next month, and Sunak is expected to use his spring statement on 23 March to outline a support package.
The business groups also pointed out that a rise in the average household energy bill to £2,000 a year would alone add 1-2 percentage points to the annual inflation rate – already at a 30-year-high of 5.4 per cent – and force a further 2 million people into fuel poverty.