The CBI is today (Thursday) urging the Government to extend the Energy Bill Relief Scheme for significant energy users beyond the end of March 2023.

It is also calling on the Government to provide additional cashflow support for vulnerable businesses, especially SMEs.

Since September, the Energy Bill Relief Scheme has been crucial in shielding business from rising wholesale gas and electricity costs after Russia's invasion of Ukraine.

The scheme has protected firms from major financial losses and saved many from collapse. The Government has committed to providing some support from April onwards, but the CBI says firms need to know if they will or won't qualify before the end of the year, helping them to plan ahead.

While wholesale gas and electricity prices have fallen back from their previous spikes, they are expected to remain historically high in the coming year - a CBI survey of nearly 700 businesses shows that firms expect their energy costs to more than double (151 per cent) if government support were no longer available from April 2023 (and once any fixed price contracts expire).

The CBI believes that the most vulnerable businesses, especially SMEs, still need to be protected from April 2023 onwards. It identifies several policy options the Government should explore to help businesses overcome the rising energy costs in the short to medium term:

• Direct support to help vulnerable firms pay their energy bills
• Provide additional cashflow support to enable companies to adjust to the high-cost energy environment
  
• Use policy to drive a step change in business energy investments to improve the security and resilience of the system.

While businesses are looking at how they can overcome rising energy costs post-April 2023, a number of firms will have to reduce staff, cut back on capital investment and in some cases pass on increased energy costs to their customers.

Matthew Fell, CBI chief policy director, said: "The high cost of energy is dominating the decisions that businesses are making each and every day. There are no easy answers in all this, but the Government will have to keep supporting the most vulnerable firms to help them stay competitive, to build resilience and in some cases to avoid collapse. On average, firms expect their bills to more than double next April.

"The Energy Bill Relief Scheme has been crucial in cushioning firms from spiralling energy costs. The CBI understands and supports the Government's decision to target the scheme from April 2023 onwards. The cost is simply too great to continue indefinitely, and the need is not evenly distributed among all businesses.

"Any extension must be aimed at firms that use the most energy, just as many of our European counterparts have already committed to doing. And businesses need to know before the year is out if they qualify or not.

"We must also take heed of the lessons from the pandemic, where providing additional cashflow support, especially to SMEs, was critical to seeing businesses through this period. Allowing businesses to defer energy bills if needed and providing grant funding through local authorities can play key roles in 2023.

"Government support has been considerable already, but with the UK falling into recession, we must ensure any downturn is short and shallow so extending targeted support must be on the cards."