Energy Bill Support for Firms to Be Reduced from April

Energy bill support for firms to be reduced from April

After warning that the current level of assistance was too expensive, the government will reduce support for companies with energy bills.

Instead of having their costs capped as they do under the current scheme, businesses will receive discounts on wholesale prices under the new one.

Heavy energy users like glass, ceramics, and steelmakers will receive a larger discount than other industries.

The program will only be advantageous to businesses when energy costs are high.

While some industry groups applauded the announcement, others cautioned that it fell short of what was needed for businesses dealing with skyrocketing costs.

A cap has been placed on the new program, which will run until the end of March 2024. This is an effort to lessen the amount that taxpayers will be exposed to rising costs.

The energy support program is primarily used by businesses, but it is also utilized by nonprofit organizations, public sector institutions like schools and hospitals, and charities.

After prices spiked in the wake of the pandemic and the war in Ukraine, the government first introduced the package last September.

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Despite being three to four times higher than their long-term average, wholesale gas prices are currently lower than they were prior to Russia’s invasion.

The government announced that it would reduce its energy subsidies for the upcoming fiscal year to £5.5 billion.

The current scheme had been described as “unsustainably expensive” by the chancellor and was predicted to cost about £18.4bn in just six months, according to official forecasters.

‘As Much Support as We Are Able’

Chancellor Jeremy Hunt said: “My top priority is to address the rising cost of living, which is a problem for both families and businesses.

“This entails making challenging choices to reduce inflation while providing as much assistance to families and businesses as we are able.”

According to a statement, bills for gas and electricity will both automatically be discounted by up to £6.97 per megawatt-hour (MWh).

This amounted to about £2,300 in savings for a pub, according to James Cartlidge, the exchequer secretary to the Treasury, who was speaking in the House of Commons on Monday.

The government added that large manufacturers, whose costs are typically much higher, will receive a larger discount, or about £700,000 in support over a 12-month period.

Due to their global competitors, these companies, according to the Treasury, will receive more assistance because they are less able to pass on higher costs to customers.

Mr. Hunt claimed that in addition, he had written the energy watchdog, Ofgem, to express his displeasure with companies that failed to give customers discounts.

Clive Watson, chairman of the City Pub Group, told the BBC that falling wholesale prices were not coming through in the bills “just yet”.

The group, which operates 43 pubs in England and Wales, has been forced to close some of them during particular hours of the day due to exorbitant costs.

Confidence will not return “until we see bills at the levels we saw them at last year,” he said, adding that the group had put expansion plans on hold until there was more certainty.

Businesses had previously raised concerns about a “cliff edge” if there was no further support for rising bills, potentially leading to job losses and bankruptcies.

But Tom Thackray of the business lobby group CBI acknowledged that it was “unrealistic to think the scheme could stay affordable in its current form”.

“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,” he said.

But it also means that some businesses will be stuck with higher costs if they locked into fixed-price contracts last year.

The Federation of Small Businesses described the announcement as a “huge disappointment”.

Martin McTague, its national chair, said: “Many small businesses won’t be able to make it on the pennies provided by the new version of the scheme.

“While the New Year should be a time of optimism and excitement, for tens of thousands of small businesses that have relied on government energy support to survive this winter, 2023 appears to be the beginning of the end.”

The firms that will receive a larger discount are represented by UK Steel, which noted that the new level of support provided is less than that in other nations like Germany.

Although it welcomed the scheme, it cautioned that the government was betting on a “calm and stable 2023 energy market, in a climate of unstable global markets”.

Meanwhile, the British Chambers of Commerce said that the new scheme falls “seriously short” for firms who are already struggling with prices, which are near a 40-year high.

It follows a warning from Bank of England Chief Economist Huw Pill that, despite a recent drop in wholesale energy prices, inflation may last longer than anticipated.


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