More than a quarter of small firms that signed up to fixed energy contracts last year fear they will have to downsize or even close when they are hit with higher bills in April.

According to a survey by the Federation of Small Businesses (FSB), around 24% of small firms are locked into energy contracts that were signed last year, and 28% of those have warned they will have to rethink their business or even cease trading.

The year-long Energy Bills Discount Scheme comes in on 1 April, replacing the current Energy Bill Relief Scheme and offering a far lower level of support for small businesses.

While market prices have stabilised for those fixing their contracts now, or who are on variable tariffs, those who fixed last year will see huge increases as they are locked into a high price before the Government’s relief.

The FSB has estimated that 370,000 small businesses in the UK will be affected. Many small businesses told the FSB that their energy bills had already soared three-, four- or five-fold or even more between 2021 and 2022.

The FSB is calling on energy companies to be sympathetic to the plight of small firms in this position and to allow them to renegotiate or “blend and extend” their energy contracts, to benefit from the significantly lower wholesale energy prices which are now available.

In the longer term, it wants small firms’ progress towards net zero to be supported by the Government through the introduction of a “Help to Green” scheme, providing small businesses with a £5,000 voucher to invest in energy-saving or even energy-generating measures, such as better insulation, solar panels, or a heat pump when cash balances are at rock bottom.

“This would reduce small firms’ carbon footprints and their energy bills at the same time, giving a huge boost to the UK’s net zero journey,” it argued.

Click here for government guidance on the new Energy Bills Discount Scheme.