Energy bill support for businesses to be reduced after March

On Monday, the government confirmed that businesses will receive reduced support for energy bills from March.

James Cartlidge, the Exchequer Secretary to the Treasury, said that the government would provide £5.5bn of “transitional support” for businesses for 12 months from 1st April 2023, but said it is “not for the government to habitually pay the bills of businesses.”

In the plan, organisations such as businesses, schools and charities will automatically receive a discount of £6.97 a megawatt hour for gas and £19.61 a MWh for electricity — this is the equivalent to a £2300 saving for a pub and a £400 saving for a small shop.

Whereas manufacturers with high energy bills will receive a greater discount equivalent to £7000 over 12 months, largely because they are unable to pass on costs to consumers due to international competition.

Businesses with energy costs below £107 a MWh for gas and £302 a MWh for electricity won’t receive support under the new scheme.

Since October, the existing scheme has allowed businesses to cap the unit cost of their energy bills where the treasury funded a discount which covered the difference between wholesale prices and a “government-supported price” of £211 a MWh for electricity and £75 a MWh for gas. This scheme has been replaced with a plan that offers a discount rather than a cap on prices.

Business owners have expressed concern about the changes that will become effective in April. Chirag Shah, CEO of Nucleus Commercial Finance, commented: “Support for business has and continues to be in short supply. Extending the previous £18bn support package would’ve been a real lifeline for struggling businesses this year.

“But cutting this support to just £2.5bn for the next 6 months risks leaving the UK’s revenue generators high and dry as the recession bites. Challenges like this only highlight the importance of the commercial financial pipeline. It is essential that businesses – of all sizes – have ready access to lending they need so that they can focus on productivity and seize growth opportunities as they arise in this tougher climate.”

Jonathan Andrew, CEO of Bibby Financial Services, feels that even though decreased support is understandable, the morale of businesses is wearing thin. He comments: “The Government’s rationale for dialling down energy bill support is understandable. But the past few years have served blow after blow for the UK’s small and medium sized enterprises as they bounce from one crisis to another. Low on cash, and short of resilience, too many will find themselves on the precipice of collapse come April unless other specific support is put in place.

“At this stage in the year, SMEs need stability and consistency to enable them to plan ahead and overcome challenges associated with unpredictable economic conditions. Sky high costs and interest rates are squeezing cash-strapped businesses at both ends. Ultimately, access to finance to enable cashflow and investment will be critical to businesses’ ability to ride out this storm. But, anecdotally, we know many are struggling to pay back loans, while others face finance blackspots with lenders retrenching from markets, and overall, there appears to be a lack of awareness of what financial support is on offer.

“Urgent action is required from the Government to provide clear direction to ensure SMEs can access finance, while ensuring the right level of support to keep them growing. Those SMEs that are equipped to build resilience and invest in their futures will play a vital role in leading the UK out of recession.”