Business energy bills expected to be cut by 50%

SME Publications/ SME XPO 2024

Businesses across the UK can expect their energy bills to be cut by around 50 per cent of their expected level this winter under a huge government support package. The scheme aims to fix wholesale gas and electricity prices  for six months from October 1. The package was welcomed by businesses but some industry leaders warned further support may be needed after the winter. It is believed the scheme will be reviewed after three months with an option to extend support for “vulnerable businesses”, though it is not clear which companies would fall into this category.

The government said the scheme would apply to companies which had agreed fixed deals at higher prices on or after 1 April, when energy bills started to surge. Those on variable and flexible tariffs will also be eligible. Companies do not need to contact suppliers as the discount will automatically be applied to their bills, with savings seen from October but received from November.

Tina McKenzie, Policy and Advocacy Chair at the Federation of Small Businesses (FSB) said: “This is a substantial move and will likely be of considerable help to small firms which have been crying out for months for measures to limit the pain caused by spiralling energy prices. Today’s announcement will give certainty for the next six months, but a tough year remains ahead of many small firms.

“Many have been waiting for details on the energy bills support package to plan confidently for the winter and beyond, so it’s encouraging to have the clarity from Government on the form that its support will take. The next stage will be for small businesses to learn what the changes mean for their current contracts and for any offers they have been looking at, but waiting to decide what to do.

“Subsidising the unit costs of electricity and gas for six months is welcome, but there are those who miss out from before the six-month period, and help must not result in a cliff-edge afterwards. We are calling for a hardship fund to be created for those who fall outside of the current support, or for whom the current support will be insufficient.”

Stephen Phipson of Make UK, which represents manufacturers, said: “Government has delivered a scheme which is simple to understand, giving reassurance to the business sector and making immediately available the much-needed help companies have been calling for across the board.”

However, he added that, as energy prices were likely to remain high for more than the duration of the scheme, firms may need “support for a longer period if we are to protect jobs and remain competitive”.

Douglas Grant, Group CEO at Manx Financial Group PLC, said: “The Government’s emergency intervention on energy costs for SMEs is very good news for UK business and shows that it is taking urgent warnings from a variety of organisations seriously. We do however believe that more needs to be done. Our research recently revealed that 22% of UK SMEs that needed external finance and/or capital over the last couple of years, were unable to access it. Indeed more than a quarter have had to stop or pause an area of their business because of a lack of finance. SMEs continue to struggle with accessing finance and that worryingly, this lack of availability is costing them and the UK economy in terms of growth at a time when it is needed the most. The amount of growth that is being sacrificed is significant and will require new solutions which are designed to address this funding gap.”

Risk expert Owen Bassett at Atradius said: “It’s great to see businesses’ current cost struggles recognised by the government today and new measures in place to provide a discount on wholesale gas and electricity costs for non-domestic customers. While this support package and scheme will help to ease the worries of businesses across the UK, thousands of firms remain in the dark about how exactly they will cover their costs beyond this winter and into next.

“Six months of assured support is excellent news, but in the lifecycle of a business, this is very short and temporary, and if costs were to hike back up in March 2023 after the reduced fees, this could leave businesses at risk of insolvencies. The data already indicates a bleak picture with more than 5,600 company insolvencies registered last quarter – 13% higher than the first quarter of this year and 81% higher than Q2 2021. This is the highest failure rate in almost a decade. The devil is in the detail, and we’re looking forward to seeing how the government will act to help businesses weather the storm beyond the six months.”

SME Publications/ SME XPO 2024