Government plans to help support business with their energy costs this winter could see retailers and other non-domestic users paying less than half the actual wholesale price for electricity and gas, in a much needed move to stave off mass closures and lay offs this winter. However, industry has been cautious in its welcome for the plan.
According to the government’s statement, non-domestic users will be paying around £211 per MWh for electricity and £75 per MWh for gas, just below half the expected unsupported cost. The amount of this Maximum Discount is likely to be around £405/MWh for electricity and £115/MWh for gas, subject to wholesale market developments.
“It will apply to fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts,” the announcement said. “It will apply to energy usage from 1 October 2022 to 31 March 2023, running for an initial six-month period for all non-domestic energy users.”
For businesses on flexible purchase contracts, typically some of the largest energy-using businesses, the level of reduction offered will be calculated by suppliers according to the specifics of that company’s contract and will also be subject to the Maximum Discount.
The deal also sees the removal of green levies for non-domestic users and all businesses will see the support automatically applied to their bills from October.
Annoucing the move, 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 adds: “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.”
Reactions to the news
Reacting to the announcement, British Chambers of Commerce director general Shevaun Haviland, says: “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.
“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. ”
Kate Nicholls, CEO of UK Hospitality adds: “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.”
