Davey demands £10bn energy bailout for small firms

A £10 billion Covid-style bailout fund is required to help high street shops, hospitality firms and other small businesses survive this winter’s soaring energy costs, Sir Ed Davey has demanded.

The former energy and climate change secretary, who is now leader of the Liberal Democrats, said the proposed scheme is needed to prevent local high streets from being turned into “ghost towns”.

The Lib Dem scheme would offer grants of up to £50,000 to help shops, pubs, restaurants and all small businesses cope with “sky-rocketing” energy bills.

Small and medium-sized businesses would be offered government grants covering 80% of the increase in their energy bills for one year, up to a ceiling of £50,000. For example, the Lib Dems estimate, a typical medium usage business like a restaurant, would receive a grant of around £10,000.

They reckon the plan would benefit the 1.4 million small businesses across the UK.

Davey called on the new prime minister, who is due to be revealed when Parliament returns from its summer recess next Monday, to immediately introduce legislation to support business on energy costs.

The Lib Dems said the estimated £9.6 billion cost of the scheme could be met by reversing planned tax cuts for big banks, including a cancellation the government’s cut to the Bank Surcharge due to take effect next April 2023 and restoring the Bank Levy to 2015 levels. Reversing these tax cuts could raise £10.6 billion over the next four years, the Lib Dems estimate.

The proposals follow increasing warnings that many small firms will go out of business this winter.

Consultancy Cornwall Insight recently estimated that companies, which have been on two-year fixed price contracts since the summer of 2020, potentially face a fivefold rise in bills if they have to negotiate a fresh deal this autumn.

Those renewing an annual contract are due to see their bills double, which in turn are typically twice what they were paying during 2020/21.

On Wednesday (31 August), six of the UK’s biggest pub chains warned that this winter could see a swathe of closures unless action is taken to stem bill increases. Pubs face average increases of 150% on their energy bills, including some 300% “upwards” of pre-pandemic levels, according to the open letter.

Davey said: “Our treasured high streets risk being turned into ghost towns and small businesses across the country risk being devastated by sky-rocketing energy bills, but Conservative ministers don’t seem to get it or care.

“Local shops, pubs and restaurants could all close their doors for the last time over the coming months unless the government steps up urgently.

“We need an energy bailout now to save the high street, rescue small businesses and keep prices down for families. This could be funded by reversing the Conservatives’ tax cuts for the big banks and focusing on saving our struggling small businesses instead.

“There is no time to waste. The new Conservative prime minister must bring in legislation to protect families and businesses from soaring energy bills as soon as Parliament returns on Monday.”