Calls for government subsidies to prevent SMEs collapsing under “crisis level” energy prices

Business leaders have weighed in on the nation’s rising electricity and gas prices, labelling it a “crisis” that will destroy margins and calling for subsidies to be issued to struggling small businesses.

Price hikes for small businesses have been announced by a number of major electricity and gas providers in the lead up to June 30, and these have have come into effect this week as the new financial year begins.

For businesses in Queensland who use Origin Energy, electricity costs will go up 5.9%, while Origin business customers in New South Wales and South Australia are being hit with 18% and 15.3% increases respectively.

Similar increases have come into effect for customers of other popular providers such as Energy Australia, with increases of 19.9% for businesses in New South Wales and 11.3% in Queensland.

These sharp price hikes have got leaders in the small business community worried, with urgent action being sought to stop businesses going under and jobs being lost.

Council of Small Business Australia (COSBOA) chief executive Peter Strong spoke to SmartCompany this morning, fresh out of a meeting with Minister for Energy Josh Frydenberg. Strong is looking to bring together a roundtable of business leaders and government officials to discuss solutions to the impending crisis.

“I’m looking to get together a roundtable of business groups to look at options of how to support retailers while the government’s policies come in,” Strong says.

“One way to get that support is via subsidies. I know that’s a big thing and no one wants to do it, but if we don’t act the outcome will be big job losses.

“That’s why I’m calling it a crisis, as no one’s come up with any coherent answers on how to solve it yet.”

Energy costs ruining SMEs “point of difference”

Strong is not alone in labelling the price increases a crisis, with Small Business and Family Enterprise Ombudsman Kate Carnell telling SmartCompany a she is hearing similar stories of crises.

Carnell believes not only will rising costs put SMEs out of business, but it will erode the point of difference for those who up their prices to survive.

“This has shocked a lot of small businesses, and it’s not just around the price increases themselves. A lot of SMEs are on pretty tight margins already, and their point of difference to competitors in the past has been the reasonably low energy costs,” she says.

“Now that has reversed, this is actually at crisis level.”

While minds may jump to businesses in the manufacturing industries as the first to be slaughtered by cost increases, Carnell warns there are “more high energy users than you’d think”, including restaurants and any business who “needs to keep a light on or a fridge running”.

The Restaurant and Catering Association deputy chief executive Sally Neville tells SmartCompany rising costs were a “huge concern” for businesses in the sector, raising similar concerns around eroding margins.

“For many restaurants and cafés currently operating on razor-thin profit margins, even a modest increase in electricity and gas prices can have a crippling effect on the livelihood of these business-owners,” Neville says.

“Combined with the costs of wages and rent, many businesses will no longer be able to remain open if the cost of electricity and gas continues to skyrocket.

“The only other alternative for businesses to avoid closing is to pass on the rising costs of electricity and gas prices to customers and given the very competitive market that exists, business operators don’t feel that this is a fair or sustainable option.”

While the government has longer-term policies in the works, and the possible results of Strong’s roundtable attempts are yet to be seen, Carnell advises businesses look at what they can do in the short term to lower energy costs.

“On the positive side there is a range of things small businesses can do about how to become more energy efficient, from looking at better ways to buy power to looking at upgrades,” Carnell says.

“Though something like a new air conditioner could seem like a big investment, a 15-year-old one will use about four times as much power as a newer one would. You can also seek advice from a range of entities who can come in and advise you on ways to save on your energy bill.”

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