Allow firms to renegotiate energy contracts, say industry bodies

23 January 2023

A coalition of industry bodies has demanded government intervention to allow firms to renegotiate energy contracts. 

Businesses that signed energy contracts between July and December 2022, when wholesale energy prices were at their highest, should be allowed to renegotiate them to reflect falling prices, a group of industry bodies said in a joint letter to business secretary Grant Schapps.

The letter – signed by the Association of Convenience Stores (ACS), the Federation of Small Businesses (FSB) the British Beer and Pub Association (BBPA) and the British Independent Retail Association (BIRA) – said changes were needed ahead of cuts to business energy cost relief

They wrote: “Without support many of these businesses will fail, resulting in economic decline, a net loss of jobs and services in communities and revenues to the exchequer. We urge you to consider how you can facilitate support for these businesses to renegotiate their contracts with encouragement from government and the support of Ofgem.”

James Lowman, chief executive of the ACS, said the government's approach to energy was “scattergun”. 

He said: “The government has failed in its attempt to come up with a solution to help businesses that need urgent support on energy costs, instead opting for a scattergun approach that won’t make a dent in the bills of thousands of shops facing huge hikes in the energy bills this year. Without urgent intervention to allow businesses to renegotiate fairer contracts, local shops will be forced to close their doors in numbers.”

The letter said there has been “complete failure of the government to focus taxpayer funds at those businesses most affected by runaway wholesale prices”. Business support will be cut by around 85%, when the £18.5bn of relief provided between October and March is slashed to £5.5bn between April 2023 and April 2024.

Andrew Goodacre, chief executive of the BIRA, added: “Last summer the energy market was chaotic with retailer and energy suppliers not sure what would happen next. 

“As a result many businesses are tied into paying high rates for energy even though wholesale prices have fallen. Allowing these businesses to renegotiate will save money for the government but also be a lifeline for thousands of indie retail shops.”

Martin McTague, national chair of the FSB, added that government should not “pull the rug” from vulnerable businesses, who face higher energy prices when the current energy support scheme comes to an end in April.

Emma McClarkin, chief executive of the BBPA, said “it only seems fair” that businesses should be able to renegotiate contract terms following the fall in wholesale energy prices, while energy suppliers have seen profits jump following Russia’s invasion of Ukraine. 

“It is clear that the cost of energy remains the biggest single issue facing brewers and pubs. Without question for many vulnerable businesses it will be the difference between being able to continue as a viable business and not.”

The Department for Business, Energy and Industrial Strategy has been approached for comment.

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