Businesses will 'struggle to pay bills' despite government energy plan

21 September 2022

Industry leaders have warned shortfalls in the government’s industrial energy plan could damage growth as ministers announce further details of energy support for businesses. 

The government announced business energy costs will be capped at the equivalent rates for households, with prices being capped at £211 per megawatt hour (MWh) for electricity, and £75 per MWh for gas. The government claimed this will cap prices at over half of the wholesale cost for industrial energy. 

​​It will apply to fixed contracts agreed after April 2022, and the support will run for a six month period between October and March. After this period, the government will announce support for “the most vulnerable non-domestic customers”.

The move will also see the removal of green levies paid by non-domestic customers.

Shevaun Haviland, director general of the British Chambers of Commerce, said the support was “significant” and “will ease the cost pressures that have been piling up on businesses”. However, she warned the limited six-month support period is not sufficient as soaring energy costs show little time of easing by the spring.

Haviland said: “Six months support is not enough for most firms to make plans for the future. We understand there are a range of unknowns for the government in looking ahead, but without that reassurance very few firms will make plans to invest or grow.

“Some businesses will still struggle to meet their bills despite this government intervention, the chancellor must prioritise those firms in his mini-budget on Friday. To truly revitalise our economy for the difficult months ahead then there must be a clear long-term plan that gives business the confidence to grow.”

Matthew Fell, chief policy director of the Confederation of British Industry, described the package as a “substantial short-term fix to a long-term problem”.

“Businesses will want to know more about the exit strategy and what happens when the six-month cap runs out,” Fell said. “The long-run solution is to double down on energy security and to incentivise firms to push ahead with ambitious energy efficiency programmes to lower demand.”

Tina McKenzie, policy and advocacy chair at the Federation of Small Businesses, warned firms that signed fixed contracts before April will find themselves excluded from the scheme.

“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.”

She criticised the planned support for “vulnerable” businesses once support comes to an end in March, arguing that “there is no such thing as a ‘vulnerable sector’ when all small businesses with premises have been deeply affected”.

Prime minister Liz Truss said: “I understand the huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods.

“As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind.”

She said the government will boost Britain’s energy supply to ensure greater energy security.

Business secretary Jacob Rees-Mogg said: “We have seen an unprecedented rise in energy prices following Putin’s illegal war in Ukraine, which has affected consumers up and down the country and businesses of all sizes.”

Rees-Mogg said the support will “improve both energy security and supply, will increase growth, protect jobs and support families with their cost of living this winter”.

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