Businesses get energy bills capped for six monthsby
The government has capped gas and electricity prices for all non-domestic customers until March 2023 to prevent “unnecessary insolvencies”.
The government has unveiled a new energy bill relief scheme from 1 October, where the wholesale price for all non-domestic customers has been fixed at £211 per MWh for electricity and £75 per MWh for gas for six months.
Today’s announcement from the Department for Business, Energy & Industrial Strategy (BEIS) said the supported wholesale price is less than half the wholesale prices anticipated this winter.
The relief scheme will be available for all UK businesses, the voluntary sector and for schools and hospitals in England, Scotland and Wales, while a parallel scheme will be established in Northern Ireland.
The government said the support is the equivalent to the energy price guarantee brought in for households earlier this month, when the support at the time for businesses was lacking any clear details.
The new supported wholesale price also removes green levies paid by non-domestic customers.
The wholesale price fix comes into force on 1 October
The scheme is set to come into force from 1 October and will initially run until March 2023 After six months, the government will review the scheme and decide whether to provide any additional support.
Firms will receive support on fixed contracts agreed on or after 1 April 2022, as well as to deemed, variable and flexible tariffs and contracts, and it will automatically be applied to bills.
The government used the example of how the new scheme will support a pub that uses 4 MWh of electricity and 16 MWh of gas a month. Against their contract signed in August 2022, they would expect to receive a discount of £3,100 per month and their bill reduced by over 40%.
Firms on default, deemed or variable tariffs will receive a per-unit discount on energy costs.
Ahead of the mini-Budget on Friday, Chancellor Kwasi Kwarteng said: “We have stepped in to stop businesses collapsing, protect jobs, and limit inflation.” Attention will now turn to Friday’s fiscal announcement to see what further support the Chancellor will provide to businesses in the short and long term.
The government said the scheme would prevent unnecessary insolvencies and protect jobs. This comes after the latest gloomy statistics from the Insolvency Service showed a continuing upward trajectory in the number of insolvencies, with the number of firms going bust in August higher than in the same period in 2021.
Reaction from the profession
The profession has broadly been supportive of the news. ACCA’s Glenn Collins said. “While a support package had been announced for consumers, businesses faced uncertainty with rising energy costs alongside higher interest rates and supply chain disruption.
“Capping the rates at which businesses can be charged for their energy usage has pulled many businesses back from the brink who were faced with shutting their doors or increasing prices by an astronomical amount to keep the lights on.”
Sarah Douglas, a long-time AccountingWEB member and the founder of HouseTree Business, sees this more as a short-term solution: “Having many hospitality clients and having produced many cashflows this will help short term. But after six months it will be a problem.”
Kirsty McGregor, accountant-in-residence at capitalise, also expressed concern about the short term nature of the announcement. "There will still be an impact on rising costs of materials by most suppliers, as they will be reluctant to pass on these cost savings just yet when the longer term is still so uncertain. Waiting three months to find out the future plan seems to prevent the greater positive effect which this announcement could have provided and is quite short-sighted of Jacob Rees-Mogg’s department."
Natalie Binstead-Wey, the founder of BW Business Accountants & Advisers, said many of the hospitality businesses she works with are already frustrated about this support being too little too late.
"The hospitality and retail sector was decimated by Covid and are only just starting to think about recovery. The cost of living crisis means consumers are cutting back on non-essential spending, which will hit hospitality and non-essential retail the hardest," she said.
"Whilst the temporary government support on energy bills is welcomed, it is only the tip of the iceberg and more will be needed to support these sectors in the longer term."