AJ Bell press comment – 21 September 2022
Danni Hewson, AJ Bell financial analyst, comments on the UK government’s energy support scheme for business:
“It’s only a stop gap but it’s a crucial one. Without government intervention many businesses would have been seriously considering their ability to keep their doors open over the winter months or at the very least looking at the possibility of cutting back on hours, services and on staff. Liz Truss has stressed the need to grow the UK economy, to increase the pie so that everyone gets a bigger slice. But with recession looming, consumer confidence battered and inflation choking growth it seems the UK is running short of ingredients.
“Cutting energy bills for businesses and public bodies by more than half is a bold move and an expensive one. But the price of not acting was likely to be even more costly in the long run. Many businesses protected from the ravages of covid are still trying to find their feet. They don’t have any kind of cushion to get them through another crisis and some are also trying to pay back loans they took out during lockdowns so today’s announcement will be a lifeline.
“Intervention should also allow companies to maintain current pricing levels, not to pass on additional costs to their buyers and thus take some fuel from the inflation fire.
“But is it enough? Energy costs have been the main thing keeping business owners up at night, but not the only thing. Staffing costs have risen, sales have been squeezed and whilst March might seem like a long way away as those cold British nights draw in, six months is nothing.
“The government has promised there will be further, targeted intervention for some sectors, but there’s still so much uncertainty and business doesn’t like uncertainty.
“Uncertainty calls for caution and timidity, not for bold investment decisions. And yet adversity and periods of economic torpor can become springboards for growth. The Prime Minister wants growth, today her government has delivered a safety net, but the big question is do they have anything planned for tomorrow that could work as a slingshot?”
