Energy announcement leaves firms feeling exposed

I 'm always astonished and proud of the utter resilience of the business community in the Greater Birmingham region, writes Deb Leary.

Despite having myriad of obstacles thrown at them over the past few years - including this week 's scaled back energy scheme - many businesses are predicting an upturn in profits during 2023.

This is the message embedded in the latest Greater Birmingham Chambers of Commerce Quarterly Business report for the last quarter of 2022. It reveals “cautious optimism ” across the region - despite the impact of the war in Ukraine, unprecedented cost pressures and ongoing recruitment challenges.

In total, 54 per cent of firms expect their turnover to improve over the next year (an increase of two per cent from Q3), while fewer are forecasting a fall in profitability (25 per cent down from 31 per cent in the previous quarter).

More than half (54 per cent) also expect their profits to rise in the same period (up from 52 per cent in Q3).

It 's heartening to see that the majority of businesses expect their profits and turnover to go up over the next 12 months.

Let 's hope that this optimism can be maintained in the face of the government 's scaled back energy support scheme announced this week because it falls short for many firms who are facing huge cost pressures.

Under the new scheme, firms will get a discount on wholesale prices rather than costs being capped as under the current one which ends in March.

Heavy energy-using sectors, like glass, ceramics and steelmakers, will get a larger discount than others. But firms will only benefit from the scheme when energy bills are high.

Ensuring businesses have the confidence and backing of the government to navigate the huge increases in energy costs is critical for staving off a deep recession, retaining jobs and facilitating a quick return to growth.

The scheme is welcome in providing some level of ongoing support to all businesses with additional help for those classed as energy intensive and offering a 12-month timeframe. But there are still many businesses that will feel, at best, underwhelmed by this announcement.

The government are clearly betting on the recent fall in wholesale prices being passed on to businesses in the coming weeks. We all hope that they are right and ready to adapt their plans if they are not or if businesses face a further round of pressures next winter.

As outlined by the British Chambers of Commerce, we need to see the Government formulate an energy support strategy to help improve long term efficiency - whether that 's increasing Ofgem 's powers to protect businesses from unscrupulous operators or pushing for greater devolution to improve energy storage at the regional level.

The revised scheme leaves sectors such as hospitality especially vulnerable. In many respects it 's the lifeblood of our communities and they feel badly let down by a government that does not seem to understand the crisis they face.

The government must get to grip with the real hardships facing SMEs and come up with a proper plan of support. Many businesses will feel more exposed by this week 's announcement and the end result is that many of them will find it just too costly to carry on.

There 's a limit to how much personal investment they can put into their enterprises and the government must understand that soon to avoid a business disaster.

Deb Leary is president of Greater Birmingham Chambers of Commerce and chief executive of Forensic Pathways

This column first appeared in the Birmingham Post