New support for households, businesses and public sector organisations facing rising energy bills in Great Britain and Northern Ireland has been unveiled by Business Secretary Jacob Rees-Mogg – supporting growth, preventing unnecessary insolvencies and protecting jobs.
The move has been broadly welcomed by industry and employers, however, the support is tempered with calls for the Government to continue to work urgently to provide more long-term security and sustainability.
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 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts. It will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial 6 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.
Stephen Phipson CEO of Make UK, the manufacturers’ organisation said: "Industry will warmly welcome the timely announcement of an energy price cap for an initial 6 months for all business users. Government has delivered a scheme which is simple to understand, giving reassurance to the business sector and making immediately available the much needed help companies have been calling for across the board at a time energy costs were spiralling out of control.
"It does appear likely that prices will remain high for many months to come, and if so 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 will monitor the impact of the cap closely, and will engage with the review mechanism later in the year to ensure that these priorities are recognised and understood.
“We recognise that all parties have moved at pace and a long way. However Manufacturing businesses are under huge pressure already many are struggling to stay afloat. We hope that this support can be made tangible as quickly as possible and not applied retrospectively at the end of the next quarter.”
UKGBC’s Head of Policy & Public Affairs, Louse Hutchins said: “Jacob Rees-Mogg is right to announce major relief on the cost of energy for businesses, charities and the public sector.
“The package is for just six months with the promise of more support to come for some sectors.
“But businesses need longer term security against high gas and electricity bills. It’s now urgent that the government comes forward with a strategy to cut the vast costly energy waste from the sector’s poorly insulated buildings and drive a shift from gas and oil heating to more efficient, low carbon options.
“Measures such as VAT and business rates cuts for businesses investing in decarbonising their buildings and requiring companies to measure and publish their energy performance will all be needed if we are to get off the hook of high and volatile gas bills year on year.
“UK Green Building Council has produced a Roadmap to decarbonise the whole of the UK’s building stock with a full suite of policy recommendations.”
James Talman, NFRC CEO, described the plans as a welcome move from the government at a time when businesses have faced difficult decisions as a result of rocketing energy prices.
“For many small firms, having this simple and sizeable discount automatically applied to bills will be a crucial lifeline,” he continued.
“However, it has to be recognised that many businesses will still be forced to spend more on energy than in previous years. Companies with small margins will still see these eroded by the increased cost of energy. At a time when many SMEs are worried about survival, this may simply be too little, too late for some firms who have struggled for months without relief. The government must now ensure that after the six-month period for which these measures are promised, businesses are not left to bear rising costs alone once again.
“NFRC members have faced spiralling material price increases, combined with added pressures such as labour shortages, over the past 18 months, and energy costs present an immense challenge that can push businesses, particularly SMEs, over the edge. Clearly it is essential that businesses are given certainty, and should know what to expect for their energy costs for longer than six months. As soon as possible, the government should set out plans for after the six month period. Small businesses will not survive otherwise.
“The construction supply chain must also play its part, by ensuring all sub-contractors and suppliers are paid promptly and in full, and by ceasing the use of retentions in new contracts now, not waiting until 2025. Our members can’t invest in skills and competency essential to our sector’s prosperity on top of additional cashflow issues.”
Shevaun Haviland, Director General of the 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.”
