The Federation of Small Business has called on energy suppliers to allow firms locked into fixed-price contracts to be able to renegotiate terms to stop further business failures.
Research by the business lobbying organisation showed more than one in ten (13%) small firms fixed their energy contracts during market peak and that 93,000 small firms now say they could be forced to close, downsize or radically restructure their businesses.
"Energy suppliers should give small firms the option to “blend and extend” their fixed energy contracts, renegotiating and signing up for longer," the FSB said.
It warned hundreds of thousands of small businesses are trapped in contracts that mean their latest bills are at last summer's peak market rate for energy - even though wholesale prices have fallen since last winter.
This comes a month after massive cuts to government support on energy bills for businesses.
"The downscaled government support means small firms that signed up to fixed tariffs in 2022 will see their bills revert back to last year’s peak levels," the FSB commented.
A significant proportion of small firms stuck in fixed contracts are from the accommodation and food sector (28%), and the wholesale and retail sector (20%).
Four in ten (42%) small firms that fixed energy contracts in the second half of last year say it has been impossible for them to pass on costs to consumers who had to tighten spending and can’t afford further price increases amid the cost of living crisis.
FSB Policy Chair Tina McKenzie said: “There are signs that small businesses may be about to turn a corner after last year’s downturn. Giving small firms a way out of last year’s market peak rates will accelerate the progress to recovery.”