The Treasury has confirmed that businesses will receive a reduction in support with their energy bills from the end of March 2023.
The Government will continue to provide energy bill discounts after March, but at a much smaller rate compared to the current agreement, causing mixed reactions from business leaders.
Not for the government to pay the bills of businesses
On Monday, James Cartlidge, the exchequer secretary to the Treasury, announced that the Government would be providing £5.5bn in “transitional support” for businesses over a 12-month period, starting from 1st April 2023, as a replacement for the Energy Bill Relief Scheme.
The original scheme was estimated to cost £18bn over its six-month lifespan, according to the Office for Budget Responsibility.
Cartlidge added that this was not sustainable, stating “It is not for the government to habitually pay the bills of businesses.”
New plan for energy bill support
The new plan means non-domestic energy users – namely businesses, schools, and charities – will now receive a discount of up to £6.97 per MWh for gas and £19.61 per MWh for electricity.
Cartlidge commented that this would equate to a saving of around £2,300 for a pub or £400 for a small retail store over the next 12 months.
However, the most energy-intensive sectors (listed here), which include major manufacturers, libraries, and zoos, will be given a significantly higher level of support.
Mixed reaction from business leaders
Martin McTague, national chair of the Federation of Small Businesses, expressed his disappointment at the news, labeling it as “completely unrealistic”, adding:
“They’ve already spent £18bn getting this far. It seems absolutely crazy to abandon so many firms when they’ve spent so much money getting them through the winter.”
Meanwhile, Gareth Stace, Director General of UK Steel, said that although the continued support was welcome, it didn’t offer enough compared to the support available in other European countries such as Germany. He said:
“The Government is betting on a calm and stable 2023 energy market, in a climate of unstable global markets, with the scheme no longer protecting against extremely volatile prices. The German Government guarantees an electricity price of €130/MWh for the whole of 2023, ensuring German industry can continue to operate competitively within Europe and beyond.
In contrast, the reformed EBDS provides a discount for electricity prices above £185/MWh, leaving UK steel producers paying an estimated 63% more for power than German steel producers this year. This situation will maintain a long-standing competitive disadvantage for UK producers, resulting in higher production costs and a reduced ability to compete this year.”
Meanwhile, Tom Thackray, CBI director for decarbonisation policy, said the extension to the scheme “will provide respite for many firms at the start of the year and help them plan ahead for the next 12 months with more certainty.”
The new scheme is set to run until March 2024.
What do you think?
Has your business been impacted by rising energy costs? How do you feel about the reduction in energy bill support? Could the Government do more to help small businesses? We’d love to hear your thoughts on this. Leave a comment below.
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