Liz Truss’ government has outlined the support that UK businesses can expect to receive this winter to help with energy costs, with the measures greeted warmly by industry bodies.
The support from ministers will see energy bills for firms reduced by around half of the expected level over the winter. This will be done by fixing the prices of wholesale gas and electricity for firms for a period of six months starting on October 1, 2022.
This Energy Bill Relief Scheme comes on top of the £150 billion package announced to help individual households with higher bills and will help protect businesses which unlike households are not subject to a price cap on energy bills and are forced to pay out more. This had led to fears that businesses which typically use up a lot of energy, such as in manufacturing, could go under.
Furthermore, the government has indicated that public sector entities such as hospitals and schools will be granted support, as will charitable organisations.
Prime minister Liz Truss said that the government had recognised the “huge pressure” that “business, charities and public sector organisations are facing with their energy bills” and it was imperative for government to step in.
Truss said: “Our new scheme will keep their energy bills down from October, providing certainty and peace of mind. At the same time, we are boosting Britain's homegrown energy supply so we fix the root cause of the issues we are facing and ensure greater energy security for us all.”
The scheme for businesses will be reviewed in January, at which point the government will determine whether to extend the support measures for what it deems to be “vulnerable businesses.” The criteria for a “vulnerable business” to date remains unclear.
Under the government scheme, wholesale prices are expected to be fixed for all non-domestic energy customers at £211 per megawatt hour for electricity and £75 per megawatt hour for gas. This will form the base cost, to which suppliers will add additional charges such as standing charges.
According to Cornwall Insight, the base cost would mean that businesses receive a 45 per cent reduction on wholesale energy prices, compared to what they would’ve been expected to pay out without government assistance.
Businesses that will be eligible for this package of support include firms with agreed fixed deals at higher prices on or after April 1, 2022, when energy prices began to increase rapidly. Businesses will also be included if they are on variable and/or flexible tariffs.
The initiative covers companies based in England, Scotland and Wales, with a similar but separate support mechanism set to be announced for Northern Ireland.
The discount will automatically be applied to bills in Great Britain from October, although the funds to enable the scheme will not begin to be distributed by Whitehall until November.
It has not been revealed how much the support package will cost the public purse, since it is contingent upon the movement of wholesale prices between October and April.
Cornwall Insight’s analysis calculates that the cost of the business support scheme for the taxpayer could total around £25 billion.
Industry bodies have warmly greeted news of the support measures but have warned that further help could be needed beyond the winter months depending on the movement of energy prices.
Make UK’s Stephen Phipson hailed the scheme as being “simple to understand” and one that provides “reassurance to the business sector” and makes “immediately available the much-needed help companies have been calling for.”
Phipson added however that support could be required for a “longer period” to maintain jobs and preserve competitiveness should energy costs remain high when the scheme expires.
Gareth Stace, director general of UK Steel, said that the move would get businesses in the industry through the winter months, but called for wider reform to the energy market to “ensure longer-term competitive prices beyond the current price”.
The hospitality sector has also welcomed the measures, with UKHospitality CEO Kate Nicholls saying that it will be “extremely beneficial” in the fourth quarter where trading around the festive season comes into play.
Elsewhere, the government has announced measures to ensure that landlords pass energy discounts down to tenants who pay all-inclusive bills, while an additional payment of £100 will be allocated to households who aren’t eligible to receive heating cost support. This covers those homes that are not served by the gas grid and fell outside the bracket for some previous measures.
Photo by Matthew Henry on Unsplash
