Chancellor Jeremy Hunt is set to slash the Government’s energy support package for businesses, halving the £40billion-worth of state support currently being provided to help firms cope with surging energy bills. According to Steven Swinford, Political Editor of The Times, Mr Hunt will send the level of financial support for businesses plummeting due to concerns about taxpayer exposure.
He tweeted: “Jeremy Hunt is poised to halve financial support on energy bills for businesses amid concerns about taxpayer exposure.Govt poised to announce package worth less than £20billion – half the current level – from April of next year.”
He added: “Ministers had been planning to focus support on most vulnerable businesses – hospitality, retail, leisure and high energy users. But energy companies have said they just don’t have the data to easily delineate between different sectors. Government now looking at a lower universal offer.”
It comes after the Chancellor assessed plans to keep providing all British businesses energy bill support after winter. The Government’s energy bill relief scheme was launched on October 1 and will run until March 20.
It covers all “non-domestic” contracts, including businesses, charities and public sector organisations like schools. Initially, the Government’s support package for business was set to involve ending support to all firms from April, shifting instead to targeted aid.
The highest discount was originally floated at £115 for gas and £405 a MWh for electricity but was later slashed to £91 for gas and £345 for electricity. According to industry sources, the scheme has been “incredibly complex to implement”, with confusion among suppliers over how to correctly bill their clients, the Guardian reports.
While support may be reduced from April, energy firms may still be relieved that the Government is still promising to provide some support.
Responding to reports that the Energy Bill Relief Scheme could be extended, Jack Arthur, business energy expert at Uswitch for Business, said last month: “An extension to the Energy Bill Relief Scheme will shield thousands of businesses across the UK from an extremely volatile energy market, which will come as welcome news for many businesses across the UK. Gas and electricity prices are already putting an enormous strain on finances and putting jobs at risk.
“Businesses who are still standing following the toughest winter in living memory will be very concerned about the prospect of even higher overheads if the Government decides to withdraw or significantly reduce its current rate of business energy support.
“It is very important that businesses check that they are on the right energy contract now before we see another massive hike in gas and electricity bills. Thousands of businesses could save millions of pounds by locking in a fixed price contract before the introduction of any further energy price rises.”
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Meanwhile, Craig Beaumont, chief of external affairs at the Federation of Small Businesses (FSB), previously told the Financial Times that “a huge proportion of the business community will become unviable” if the Government’s financial support ends.
The FSB’s Out in the Cold report, published in September, revealed that the overwhelming majority (96 percent) of small firms are still concerned about rising energy bills. And nearly two-thirds (63 percent) of all small firms warned their energy costs have gone up from the amount they were paying last year.
One of the sectors hit hardest by surging energy costs, sparked largely by Russia’s war in Ukraine and gas supply cuts to Europe, is manufacturing. This industry is energy intensive and the sector fears that lower levels of Government support could be detrimental.
Rob Flello, chief executive of the British Ceramic Confederation, said: “While we welcomed the government’s non-domestic energy bill relief scheme as a lifeline, their announcement of a review sparked concern. We warned that if Government support was downgraded, then this industry would be on a cliff edge. The Government must not leave us in a precarious position.”
A Treasury Spokesperson said:“We are protecting businesses from high energy costs this winter, caused by Putin’s invasion of Ukraine, through the six-month £18 billion Energy Bill Relief Scheme. However, this is very expensive, and we need to ensure longer-term affordability and value for money for the taxpayer.
“That is why we are currently carrying out a review with the aim of reducing the public finances’ exposure to volatile international energy prices from April 2023. We will announce the outcome of this review in the New Year to ensure businesses have sufficient certainty about future support before the current scheme ends in March 2023.”