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The Government has announced a new scheme that will see energy prices for non-domestic energy customers such as businesses, charities and public sector organisations cut – protecting them from rising energy costs.
Through a new Government Energy Bill Relief Scheme, the Government will provide a discount on wholesale gas and electricity prices for all non-domestic customers (including all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals) whose current gas and electricity prices have been significantly inflated in light of global energy prices. This support will be equivalent to the Energy Price Guarantee put in place for households.
It will apply to fixed contracts agreed on or after 1st April 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from 1st October 2022 to 31st March 2023, running for an initial six-month period for all non-domestic energy users. The savings will be first seen in October bills, which are typically received in November.
As with the Energy Price Guarantee for households, customers do not need to take action or apply to the scheme to access the support. Support (in the form of a p/kWh discount) will automatically be applied to bills.
To administer support, the Government has set a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this winter – which is a discounted price per unit of gas and electricity. This is equivalent to the wholesale element of the Energy Price Guarantee for households. It includes the removal of green levies paid by non-domestic customers who receive support under the scheme.
The level of price reduction for each business will vary depending on their contract type and circumstances.
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. 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.”
Chancellor Kwasi Kwarteng said “We have stepped in to stop businesses collapsing, protect jobs, and limit inflation. And with our plans to boost home-grown energy supply, we will bring security to the sector, growth to the economy and secure a better deal for consumers.”
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. 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.”
“This, alongside the measures we are taking to boost the amount of domestic energy we produce to improve both energy security and supply, will increase growth, protect jobs and support families with their cost of living this winter.”
Kate Nicholls, CEO of UKHospitality said “This intervention is unprecedented and it is extremely welcome that Government has listened to hospitality businesses facing an uncertain winter. We particularly welcome its inclusiveness – from the smallest companies to the largest – all of which combine to provide a huge number of jobs, which are now much more secure.”
“The Government has recognised the vulnerability of hospitality as a sector, and we will continue to work with the Government, to ensure that there is no cliff edge when these measures fall away.”
Responding to the detail of the scheme, Jonathan Geldart, Director General of the Institute of Directors, said:
“This is an important intervention by the government and provides much needed short-term reassurance for the numerous firms that are facing soaring energy bills.
“We particularly welcome the decision to include all contracts signed since 1stApril 2022 within the scope of the new arrangements, and also the commitment to work with suppliers to ensure all businesses currently on variable contracts have the option of a fixing rate deal that benefits from the government support price. Currently around 1 in 4 firms are on variable arrangements so it is important they are now given maximum certainty to help them plan.
“We look forward to working with the government in the coming months to ensure that any further relief is carefully 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.”
Tina McKenzie, Policy and Advocacy Chair, 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.”
“Many have been waiting for details on the energy bills support package to plan confidently for the winter and beyond, so it’s encouraging to have the clarity from Government on the form that its support will take. The next stage will be for small businesses to learn what the changes mean for their current contracts and for any offers they have been looking at, but waiting to decide what to do.”
“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.”
“There will be hardship for some businesses which signed fixed contracts after prices rose but before April, who find themselves excluded from the scheme. FSB calls on energy suppliers to allow those customers to switch without charge to new fixed contracts, covered by the Energy Supported Price, if that makes the difference for the small business to survive.”
“There will also be hardship for those who’ve paid elevated bills since April, as this help only kicks in for October usage – i.e. November bills. Help is then estimated by the Government to cover up to half the increase from that part.”
“The promise of equivalent support for those using heating oil will be warmly received, as this accounts for a large number of small businesses.”
“For all businesses that fall outside the scope of today’s support, or where the help is insufficient for the business to be viable, we urge Government and energy providers to introduce a discretionary funding pot, similar to the £150 million created for those households who don’t pay council tax. The remainder of the Covid Additional Relief Fund – due to be taken back by the Treasury next week – could be used for this purpose.”
“Small businesses are the definition of vulnerable when it comes to these energy price hikes. Small firms do not have the ability to hedge, or negotiate energy prices, so we will be encouraging Government to continue to help small businesses across all different sectors after the six months have elapsed.”
“In our view, size, rather than geography or sector, is a good indicator of whether a business has capacity to face higher bills. There is no such thing as a ‘vulnerable sector’ when all small businesses with premises have been deeply affected.”
“The Government has rightly listened to FSB’s call to match energy help for small businesses with that delivered for households. We have been highlighting small firms’ plight and pitching a range of policy levers the new administration can pull, so are pleased that today’s announcement has taken notice of our input.”
“With Government stepping in to help firms with energy bills, energy companies must play their role to support their small business customers.”
“Energy providers must pass on the benefit of the freeze in full, and must immediately provide updated bills and quotes to each small business customer who will be wondering today what the changes mean for them.”
“We’re concerned that there is no mention of a cap on rises to standing charges, which are the other main element of energy bills. While households’ standing charges will be capped, the same can’t be said for businesses, and we call on energy suppliers to support their small business customers by committing to lowering standing charges as far as possible.”
“We’d like to see energy companies promise not to disconnect businesses from energy supply that are currently unable to pay for their energy bills this winter, and not ask for disproportionate upfront payments. The introduction of a ‘time to pay’ arrangement to help small businesses in arrears would also be welcome.”
“Currently, small firms could be disconnected from energy supply if they’re unable to pay bills after 30 days. We will be writing to energy companies in this regard and encourage them to support their small business customers in this difficult period.”
Cameron Gunn, Senior Partner at Resolve, said “The UK government is set to introduce a price cap on wholesale energy prices today, a scheme which I know has been long-awaited by many UK SME owners. This will provide some much needed breathing space for SMEs, particularly those in the retail and hospitality sectors which have been under a lot of pressure from mounting energy costs. Whilst this price cap will be welcomed with open arms, for many business owners, this is only lessening one of the many macroeconomic pressures they are contending with. Businesses, particularly SMEs, will likely require further support to overcome these additional inflationary and supply chain challenges.”
Shevaun Haviland, Director General of the British Chambers of Commerce (BCC), said “For months we have been calling for Government intervention to help businesses with eye watering energy costs. This support package is significant and will ease the cost pressures that have been piling up on businesses.”
“It will allow many firms that were facing closure, or having to lay off staff or reduce output, to keep going through the winter. But the exact level of support will vary greatly from business to business depending on the detail of its contract, so some will inevitably do better than others.”
“We now need action to get this saving passed onto business as soon as possible – every day will put some firms closer to the edge and they cannot hang on much longer. There must also be effective legal oversight to ensure no firms that are due this money miss out. For those that will benefit, 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. There are a range of other challenges that must be addressed including labour shortages, supply chain disruption, and rising raw material costs. 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.”
Douglas Grant, Group CEO at Manx Financial Group PLC, said “The Government’s emergency intervention on energy costs for SMEs is very good news for UK business and shows that it is taking urgent warnings from a variety of organisations seriously. We do however believe that more needs to be done. Our research recently revealed that 22% of UK SMEs that needed external finance and/or capital over the last couple of years, were unable to access it. Indeed more than a quarter have had to stop or pause an area of their business because of a lack of finance. SMEs continue to struggle with accessing finance and that worryingly, this lack of availability is costing them and the UK economy in terms of growth at a time when it is needed the most. The amount of growth that is being sacrificed is significant and will require new solutions which are designed to address this funding gap.”
“The extension of Recovery Loan Scheme (“RLS Phase 3”) was encouraging for UK business. RLS, which Conister was accredited for in August last year, has provided the necessary catalyst that many sectors required to thrive. As demand for working capital soars to new highs, more businesses desperately require liquidity provisions to counteract record inflation levels, rising interest rates, supply chain issues and increases in wages. With the cost of borrowing set to increase, many SMEs are facing their own cost of living crisis.”
“For some time we have been calling for a sector focused permanent government-backed loan scheme which brings together both traditional and alternative lenders to guarantee the future of our SMEs. As the government looks for other ways to power the economy’s resurgence, the importance of a permanent scheme cannot be understated, it could act as the fundamental difference between make or break for many companies, and in turn, our economy. We very much hope this is something that becomes a reality.”
