Business body the CBI is the latest organisation to sound a warning about the impact of the energy crisis. On Wednesday, it published the results of a survey of its members, indicating that almost a third of firms expected energy costs to rise by more than 30% over the next three months. Roughly the same proportion expected rising energy bills to affect their capacity for investment.
Businesses are, of course, not covered by the Ofgem price cap, which in any case has not provided much protection even to the breadline consumers it is supposed to safeguard.
The CBI proposed a number of measures, starting with better publicity for the Recovery Loan Scheme, a government-backed, post-Covid finance measure aimed at small and medium-sized firms. It was extended for two years in July, with little fanfare.
More significantly, it proposed an immediate business rates freeze, observing that planned double-digit, inflation-linked rises would simply pile “additional pressures on firms when they can least afford them”. Many firms, it suggested, would be tipped over the brink by unaffordable rates.
“Firms aren’t asking for a handout,” said CBI chief policy director Matthew Fell. “But they do need autumn to be the moment government grips the energy cost crisis. Decisive action now will give firms headroom on cashflow and prevent a short-term crunch becoming a longer-term crisis.”
Many in property will back the CBI’s call to the hilt.
But cost is not the only energy crisis set to trouble the sector. As we highlight his week, lack of grid capacity has emerged as a serious issue in parts of London, with some developers warning that schemes may be pushed back by years while they wait for electrical infrastructure to be brought up to speed.
While the neglected state of the UK’s water infrastructure has been drawn into sharp focus by hosepipe bans and sewage discharges, the electricity grid is not much better off in parts of the nation, it seems.
I recently spoke to a new-connections engineer at National Grid who told me developers routinely take utilities for granted, and often get in touch with unrealistic timelines – sometimes when construction or demolition is already under way. His advice was to start conversations with utility providers much earlier, right at the initial planning stages, so a proper feasibility study can be done.
The supply problem is bound to get worse. The move from petrol and diesel to electric vehicles (EVs) has started in earnest – they are on our roads in rising numbers and EV chargers are now a required element of new residential and commercial developments in England. The switch is sure to put further pressure on the grid, as will other trends.
In a November 2021 report, the National Infrastructure Commission warned: “Demand for electricity is forecast to grow significantly over the coming decades, as heating, surface transport and other sectors of the economy are electrified, and there is potential for cooling to be more widely required as climate change impacts maximum summer temperatures.” The advisory body was not exactly confident the grid was on course to cope.
As well as starting conversations early with energy providers, developers and property owners would be well advised to maximise the self-sufficiency of their schemes. A strong focus on solar panels and battery storage seems like a smart move – and not just for green reasons.
If you think a hosepipe ban is inconvenient, consider the electrical equivalent.