FDs face ‘double whammy’ on carbon bills

Finance directors could be hit with a “double whammy” of carbon payments that may put a squeeze on cashflow next year.

Government changes to the Carbon Reduction Commitment (CRC) will force large UK companies to pay for their energy emissions twice in a year. This could see FDs struggling to raise capital for carbon, according to experts in the environmental business sector.

Companies that spend approximately £500,000 annually on energy bills must pay for carbon emissions every financial year.

Companies may be forced to pay for two years worth of emissions in one lump sum.

The government originally planned to make businesses pay for their emissions in 2010.

However, concerns over financial stability, in the wake of the recession led the UK government to defer payments by a year.

Tony Rooke, UK environmental programme manager at IT and business consultancy Logica, said: “The CRC is going to cost [businesses] close to 15% of their bill in [2011]…If you look at BT or some of the bigger supermarkets, their energy bills are in excess of £200m annually.

“Most companies don’t have huge amounts of cash in reserve – so are going to have to borrow it.”

Emma Wild, principal policy adviser on climate change for the CBI, said: “It is quite a significant payment in 2011 and we are concerned on the impact it could have.”

Russell McBurnie, finance director at Tenon, said that the government was not “going about the issue in the right way”.

He conceded that the government had taken into consideration the effects of the downturn on businesses by deferring payment for a year, but warned there was no guarantee “the economy will be much better in 2011”.

“The recession has come at a difficult time for the CRC to be launched,” said Logica’s Rooke.