British charities and small businesses have warned that a new levy on energy bills, intended to support the government’s nuclear power ambitions, could raise their costs by thousands of pounds a year.
The extra charge could mean a significant cost hike for charities and small businesses with high energy use, meaning community services may be cut and economic growth curtailed, according to trade groups.
For most charities, the levy, which takes effect in November, will mean an increase in costs of between £100 and £240 a year, but some could experience increases of up to £2,500, according to Social Investment Business, an organisation that offers loans and financial support to charities.
Nick Temple, the chief executive of Social Investment Business, said: “Adding yet more charges on top of charity electricity bills penalises our most vital community spaces at a time when they are already struggling.”
For small business, including those in hospitality, the extra costs could undermine growth in the UK economy and make the shift from fossil fuels to low-carbon electricity more expensive, according to trade associations.
The levy is designed to pay back investors in the Sizewell C nuclear project in Suffolk while the power plant is under construction.
Households can expect the levy to add about £12 a year to their energy bills, but organisations with high energy use will shoulder a greater cost burden. This will have a disproportionate impact on smaller businesses and charities with high energy demands because energy intensive industries such as steel, cement and glass-making have been granted exemption.
A Bristol-based community arts organisation, Spike Island, has been told to expect a hike of £1,ooo a year from the nuclear levy alone. The company, which provides subsidised studios for underrepresented artists, expects the extra costs to put a strain on its work.
Kate Ward, the deputy director at Spike Island, said the rise in electricity costs would prevent the charity from switching to low-carbon heating, such as heat pumps, while increasing its overall running costs and putting its work with artists at risk.
“The government needs to rethink how they approach electricity bills to make it viable for more charities and small businesses to make the right decisions for the planet,” Ward said.
Business groups have also said that the costs are a “huge concern” for smaller companies, which they say will be forced to carry a disproportionate cost burden because larger companies were given exemptions.
Craig Beaumont, the executive director of the Federation of Small Businesses (FSB), said: “Small businesses are already feeling the strain from increasing utility bills, with many saying it’s now holding back their growth. Further increases to non-commodity costs will only add to this pressure.
“The government is protecting high-intensity users against these hikes, but as a result small firms’ bills are due to shoot up. This is in effect a cross-subsidy. Local small businesses should not shoulder such a high proportion of the costs themselves.”
Kate Nicholls, the chair of the trade body UKHospitality, said: “This is yet another example of hospitality businesses subsidising other sectors. It’s not just the nuclear levy, but also the energy discounts for large, energy-intensive manufacturers, which will be offset by higher bills for community pubs and neighbourhood restaurants.
“The constant focus on the needs of the industrial strategy sectors is having real-world impacts for the other 70% of the economy. Adding yet another cost on to hospitality businesses will only put further pressures on prices at the bar, which will fuel inflation.”
A government spokesperson said: “Thriving small businesses and charities are at the heart of our communities, which is why we have extended business rates relief, supporting economic growth across the country and support for those who need it most.
“The only way to bring down energy bills for good is with the government’s clean energy superpower mission, which will also secure thousands of good, skilled jobs and billions in investment.”
