A new energy scheme for businesses, charities, and the public sector has been confirmed ahead of the current scheme ending in March.
The new scheme will mean all eligible UK businesses and other non-domestic energy users will receive a discount on high energy bills until 31 March 2024.
The Government maintains this will help businesses locked into contracts signed before recent substantial falls in the wholesale price manage their costs and provide others with reassurance against the risk of prices rising again.
But British Chambers of Commerce Director General, Shevaun Haviland, said that despite Government efforts, an 85% drop in the financial envelope of support will fall short for thousands of UK businesses who are seriously struggling.
“Many businesses have been fighting for their survival for months, and rising energy costs have fast become the tipping point,” continued the DG. “While we welcome the 12-month duration of this package, its value is nowhere near far enough and means that for some firms, energy will now be a cost too far.
“We understand Government must consider public finances, but any support package, short or long term, should be right for business - otherwise we’re going around in circles. The wrong type of support will continue to see business confidence deplete and Government having to revisit its package.
“This is not about giving a handout to failing firms. It is about investing in British businesses, many of whom are confident about the strength of their orderbooks despite being hammered by eye-watering energy costs.
“Our economy will not be able to grow if our businesses are in decline.
“Alongside an energy support package, we need an energy support strategy to get businesses on the right track to longer term efficiency.
“There are several options to consider, and we urge the Government to prioritise the following three:
- Increase OFGEM’s powers: Ensure effective competition in the business energy market for non-domestic contracts by extending OFGEM’s regulatory powers to guarantee businesses access competitive fixed rate contracts, and energy providers move swiftly to pass on wholesale price reductions.
- Energy production: Government to bring forward ambitious plans to enable more renewable and sustainable energy production across the UK.
- National energy saving campaign: Government should launch a national campaign with support initiatives for businesses to drive down current consumption through energy efficiency measures, such as green grants and tax incentives.
“It is a critical year for the UK economy and with the right focussed support, businesses can help turn the economy around and get the UK back to growth and prosperity.”
The government provided an unprecedented package of support for non-domestic users through this winter, worth £18 billion per the figures certified by the OBR at the Autumn Statement. This is equivalent to the cost of an increase of around three pence on people’s income tax.
The government has been clear that such levels of this support, unprecedented in its nature and huge scale, were time-limited and intended as a bridge to allow businesses to adapt. The latest data shows wholesale gas prices have now fallen to levels just before Putin’s invasion of Ukraine and have almost halved since the current scheme was announced.
The new scheme therefore strikes a balance between supporting businesses over the next 12 months and limiting taxpayer’s exposure to volatile energy markets, with a cap set at £5.5 billion. This provides long term certainty for businesses and reflects how the scale of the challenge has changed since September last year.
The Chancellor of the Exchequer, Jeremy Hunt, said: “My top priority is tackling the rising cost of living – something that both families and businesses are struggling with. That means taking difficult decisions to bring down inflation while giving as much support to families and business as we are able.
“Wholesale energy prices are falling and have now gone back to levels just before Putin’s invasion of Ukraine. But to provide reassurance against the risk of prices rising again we are launching the new Energy Bills Discount Scheme, giving businesses the certainty they need to plan ahead.
“Even though prices are falling, I am concerned this is not being passed on to businesses, so I’ve written to Ofgem asking for an update on whether further action is action is needed to make sure the market is working for businesses.”
From 1 April 2023 to 31 March 2024, eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill, except for those benefitting from lower energy prices.
A substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries.
CBI Director for Decarbonisation Policy, said: “The extension to the scheme will provide respite for many firms at the start of the year and help them plan ahead for the next 12 months with more certainty.
“It’s unrealistic to think the scheme could stay affordable in its current form, but some firms will undoubtedly still find the going hard. The Government has done much to protect businesses through the energy crisis. It must remain open, flexible and pragmatic in its approach to volatile wholesale energy markets as the year unfolds.
“Heavy energy users and those exposed to global trade are among some of the most impacted in the current crisis, so the additional support for these firms is a particularly welcome step.”
