Government reveals energy help for businesses

The Government has revealed its plans to help businesses cope with the energy crisis.

It has set a cap of 21.1p per kWh for electricity and 7.5p per KWh for gas. Wholesale costs this winter are forecast to be 60p and 18p respectively.

The cap will run for six months from October 1 and will apply to fixed contracts agreed on or after April 1, as well as to deemed, variable and flexible tariffs and contracts.

The Energy Bill Relief Scheme applies to businesses, public and third sector organisations. The cap will be automatically applied to bills, with suppliers then compensated by Government.

The Government has not released an estimate of the cost of the scheme, which will depend on the wholesale market price between October and March.

The measures were announced ahead of Friday’s mini-Budget, when Chancellor Kwasi Kwarteng is expected to announce a range of measures to ease the pressure on businesses and households.

New Business Secretary Jacob Rees-Mogg said there had been “an unprecedented rise in energy prices following Putin’s illegal war in Ukraine”, although the wholesale price of gas was already around four times higher in January – before the invasion – than a year earlier.

Rees-Mogg added: “The help we are already putting in place will save families money off their bills, and the Government’s plans for businesses, charities and public sector organisations will give them the equivalent level of support.”

Stephen Phipson, chief executive of manufacturing group Make UK, welcomed the “timely announcement” but warned more will soon need to be done.

He said: “Government has delivered a scheme which is simple to understand, giving reassurance to the business sector. However as appear prices will likely remain high for many months to come, industry will need support for a longer period to protect jobs and remain competitive, so the further announcement of a review on future support at the 3 month stage is reassuring.

“We hope that this support can be made tangible as quickly as possible and not applied retrospectively at the end of the next quarter.”

Jonathan Geldart, Director General of the Institute of Directors, added: “We look forward to working with the government in the coming months to ensure that further relief is targeted at those industries and sectors whose survival is most threatened by current economic conditions.

“Ultimately, however, business and government will need to work hand in hand to develop domestic energy sources and reduce consumption and dependency on expensive fossil fuels.”

Sacha Lord

Sacha Lord, night time economy adviser for Greater Manchester said: “I’m pleased that the economic importance of pubs and the hospitality sector is finally being recognised and that support is being pledged beyond this initial six month period.

“Businesses need to be able to plan ahead and forecast expenditure as a basic feeder of growth and investment and these plans may go some way to staving off the redundancies we have been expecting across the sector.”

He added: “However, only time will tell if the Government has gone far enough. Even with this help, businesses will still be paying more than they’re used to, and off the back of the pandemic, the real concern is whether they can afford to continue trading even with the support being offered.

“The hospitality sector is the fourth biggest employer in the UK, and its importance needs to be reflected in the support it is given. We are still pushing the Chancellor to offer wider support in his fiscal statement on Friday, including a reduction in VAT and business rates relief, both measures that will, undoubtedly, offer a lifeline to the sector.”

Chris Fletcher, policy and campaigns director at Greater Manchester Chamber of Commerce, said: “On the face of it the Government’s statement today giving further details on the previously announced support for business with their energy bills is to be welcomed.

Chris Fletcher

“Many businesses wanted certainty and stabilised prices as a first step in addressing what, for many, remains a considerable challenge. Government today have delivered that, but concerns still remain that whilst domestic users have that certainty for two years, businesses have just six months, though there is a review in three months’ time to assess the effectiveness of the plan.

“This does give Government some wriggle room to adjust the scheme further if required with some expectation this will be needed.”

Paul Cherpeau, chief executive of Liverpool Chamber, said: “While the announcement is welcome to maximise the chances of survival for many businesses, we must acknowledge that the scheme will only achieve its intended outcomes if it is implemented swiftly and businesses are given clarity on how long the support will last.

“We look forward to seeing further details of measures to alleviate business costs and obstacles to growth in the mini-budget later this week.”

Tina McKenzie, policy and advocacy chair at the Lytham-based Federation of Small Businesses (FSB), said: “This is a substantial move and will likely be of considerable help to small firms which have been crying out for months for measures to limit the pain caused by spiralling energy prices. Today’s announcement will give certainty for the next six months, but a tough year remains ahead of many small firms.

“Subsidising the unit costs of electricity and gas for six months is welcome, but there are those who miss out from before the six-month period, and help must not result in a cliff-edge afterwards. We are calling for a hardship fund to be created for those who fall outside of the current support, or for whom the current support will be insufficient.”

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