Surging energy costs are increasing the number of Europe's small and medium sized businesses at risk of collapse and European Union action to cap prices would to help them survive, top officials from the EU's SME association said on Wednesday.

Russia has cut energy supplies to Europe in retaliation for Western sanctions imposed on Moscow over its invasion of Ukraine, sending prices skyrocketing. Russia blames those sanctions for causing the gas supply problems, which it puts down to pipeline faults.

SMEunited President Petri Salminen said retail companies he spoke to in Finland 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.

"This is a fear that is rising among entrepreneurs across Europe. The problem has been there since spring but now it is getting worse," Salminen told Reuters in an interview.

Gerhard Huemer, SMEunited director of economic and fiscal policy, said 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.

"These are companies that may not survive the next period," he said.

Small and medium-sized enterprises (SMEs) represent 99% of all businesses in the 27-nation EU. They employ around 100 million people, or two thirds of all employed and account for 53% of Europe’s GDP.

The European Commission on Wednesday proposed a price cap on Russian gas, a mandatory EU cut in electricity use and a ceiling on the revenue of non-gas power generators to try to soften the impact of the price surge.

"A European solution would be the most efficient to avoid meddling with market mechanisms on the electricity market, but when it comes to subsidising households then national solutions are the best," Salminen said.

"We would encourage all EU member states to use the room available to decrease energy costs," he said.

Huemer said that if Russian gas deliveries stop altogether, energy prices would rise further, making some form of government or EU support a must.

"One idea would be to compensate companies for 80% of their average energy consumption at prices from before the (Ukraine) war and let them pay the rest at market prices as an incentive to cut energy consumption and increase efficiency," he said.

(Reporting by Jan Strupczewski. Editing by Jane Merriman)