How the Rising Energy Prices are Threatening European SMEs
Are rising energy prices threatening European SMEs? Find out how this issue is impacting businesses and what can be done to help.
More and more SMEs across Europe are hit by extreme rises in electricity and gas prices. Some of them had to stop or reduce their production or are loss-making. Some of them warn they may not survive winter.
Energy Prices Reached All-Time Highs in 2022
Gas and electricity prices reached record levels in 2021 and again hit all-time highs in 2022. Prices started rising last summer when the world economy picked up after COVID-19 restrictions were eased. Subsequently, Russia's invasion of Ukraine and its weaponisation of gas supply have exacerbated this situation with electricity retail prices having increased by almost 50% year-on-year from July 2021.
This dramatic increase in energy prices is putting pressure on EU households, Small and Medium Enterprises (SMEs) and industry at large. Vulnerable customers and the energy poor are the hardest hit, but increasingly middle income households and SMEs also risk not being able to pay their energy bill this winter.
And this is a real emergency, if you consider that SMEs represent 99% of all businesses in the 27-nation EU and that they employ around 100 million people, or two thirds of all employed and account for 53% of Europe’s GDP.
SMEUnited Calls for an Emergency Plan from the EU
SMEunited, the association of crafts and SMEs in Europe with around 70 member organizations from over 30 European countries, urged the European Union for action to cap prices to help them survive.
Speaking in Finland last September, SMEunited President Petri Salminen said small companies in Europe were facing jump in energy bills from 1,000 euros a month to 10,000 euros a month, making it hard for businesses to remain viable.
The President pointed out that normally around 5% of companies went bust every year, now the percentage of firms at risk of collapse was up to 11% in Finland and 16% in Spain, while 24% of companies in Belgium were already making a loss.
The Measures from the European Commission.
The European Commission has proposed several actions and measures to address the problem, phase out the EU’s dependency of Russian fossil fuels and help EU countries and citizens tackle the rising prices.
European Commission President Ursula von der Leyen announed at the beginning of October that the EU executive has "started work" on a "targeted and temporary" measure to cap gas prices across the bloc. In a letter to European leaders, she wrote that any kind of price cap on gas would have to come with new mandatory savings and binding solidarity agreements. However, no concrete action seems to be in place yet to help SME surviving through the winter.
SMEunited, together with its member organizations, demands to extend and expand the State aid crisis framework: The focus should now be on the swift implementation of SME support measures to avoid unnecessary business failures. SMEs are open to further emergency intervention in the energy market if it can be done in a way which ensures the security of supply without unintended increases in demand.
Finally, SME associations demand that national governments immediately implement the emergency interventions put forward by the Council Regulation to ensure the survival of those SMEs most impacted by the energy crisis.
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