Relief for businesses as energy price cap is announced
By David Wood | 21st September 2022
Businesses across Gloucestershire are drawing a huge sigh of relief today following the government's announcement of a massive support package for energy bills.
Energy bills for UK businesses will be cut by around half their expected level this winter.
The Energy Bill Relief Scheme will fix gas and electricity prices for all firms for six months from 1 October. Schools, hospitals, charities and other settings such as community halls and churches will also get help.
The news follows the government's announcement of a £150bn plan to help households with their soaring bills for two years.
It is hoped the latest support will avoid mass bankruptcies and job losses across industries.
No overall price tag has been put on the latest subsidy to firms as the ultimate cost will depend on what happens to the wholesale market price between October and April, when the support expires.
Under the scheme, revealed by the Department for Business, Energy and Industry, wholesale prices are expected to be fixed for all non-domestic energy customers at £211 per MWh for electricity and £75 per MWh for gas for six months.
It's understood the scheme will be reviewed after three months with an option to extend support for "vulnerable businesses" - but it is not known what sectors come under the category.
Taj Uddin, owner of Cafe Boho in Great Norwood Street, Cheltenham, is among many business owners in Gloucestershire drawing a sigh of relief today.
He told Punchline: "It's a relief that they are putting a cap on it and if that cap is more than half to what we were thinking, it's a big relief and there's a chance that we can make it through the winter and we'll see what next year brings.
"Otherwise for a small business like mine, which I took over only five months ago, I didn't budget for this. I would have struggled and would have found it difficult to survive I think, until now. It's better news than I was expecting but still it's going to be difficult."
Claire Ralph, policy manager at Business West, said: "Business West welcomes details announced today on the Energy Bill Relief Scheme for businesses across the South West which provides an element of certainty, for a limited time, on the unit prices that business customers can be charged by their utility providers - set at 21.1p per kilowatt hour (kWh) for electricity and 7.5p per kWh for gas.
"No restriction has been announced to the standing charge element of non-domestic bills, which look to remain uncapped.
"This support provides businesses vital breathing and planning space to manage cashflow and profitability through the winter months. Business West on behalf of firms across the region calls on early clarity of longer term protection the Government has promised for 'vulnerable' customers given the potential for a cliff edge on 1 April 2023 if this isn't well targeted.
"We are relieved that firms who attempted to forestall tariffs continuing to escalate by locking in new fixed term contracts since 1 April 2022 will be covered by the scheme at the same rates."
"Businesses don't need to do anything to qualify as the new rates will be applied by their utility providers via adjustments to their bills - providing timely relief to anxious firms."
Sam Holliday, Federation of Small Businesses development manager for Gloucestershire, said: "We are obviously very pleased to hear that small businesses will be getting a package of energy price support to help them this winter because without it we may have lost thousands of otherwise viable companies in this area and beyond. Today's announcement is, therefore, certainly a positive step in the right direction.
"Even with this support, however, dangers remain. Many of those that will qualify for the full package of help are already existing on tiny margins and this may still not be enough to keep them profitable but the situation is even worse for those who may already be locked into very expensive tariffs that cannot change them.
"This huge attack on the business bottom line is similar in some ways to what we saw with Covid and we hope the Government is as flexible with support for this crisis as it was for the pandemic. We hope, therefore, it will consider creating a Covid-style discretionary or hardship fund to help businesses that fall out of the support range, or for whom the package will be insufficient.
"Today's move will at least provide some certainty in a very uncertain business landscape and we hope that conversations about support for businesses will continue until the scheme is reviewed again. This is an ongoing issue and will need to be constantly assessed and reassessed to ensure businesses can continue to grow the economy without the fear of energy bills holding them back."
Firms do not need to contact suppliers as the discount will automatically be applied to bills and savings will be seen from October's bills but received in November.
The scheme will apply to fixed contracts agreed on or after 1 April and variable and flexible tariffs and contracts.
Prime Minister Liz Truss said the government understood the "huge pressure businesses, charities and public sector organisations are facing with their energy bills".
"As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind," she said.
"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."
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