Business leaders gave a mixed reaction to the revised package of measures unveiled by the government on Monday as the Treasury seeks to cut the cost of compensating companies for soaring gas and electricity prices.
James Cartlidge, the exchequer secretary to the Treasury, said on Monday that the government would provide £5.5bn of “transitional support” for businesses over 12 months from 1 April 2023 replacing the Energy Bill Relief Scheme which came with an estimated price tag of £18bn over its six-month lifetime, according to the Office for Budget Responsibility.
Under the new measures and from 1 April 2023 to 31 March 2024, eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill, except for those benefitting from lower energy prices.
Not for government to pay "the bills of business"
A substantially higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries.
Martin McTague, national chair of the Federation of Small Businesses, was not convinced calling the new scheme a “massive disappointment” which will hardly scratch the surface for many businesses.
“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” he commented.
But the government claimed the current package was unsustainable. “It is not for the government to habitually pay the bills of businesses” Cartlidge pointed out.
Business at the "mercy of Putin"
McTague, though, thinks it is “completely unrealistic” to think that small businesses can adapt to the new energy landscape in six months, over the winter.
“They have to have a realistic timetable in which they can adapt to the new, much higher prices.”
“Otherwise, what you’re essentially doing is leaving them at the mercy of Putin” he warned.
But Tom Thackray, CBI director for decarbonisation policy, was more upbeat claiming 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.”“It’s unrealistic to think the scheme could stay affordable in its current form, but some firms will undoubtedly still find the going hard. The Government has done much to protect businesses through the energy crisis. It must remain open, flexible and pragmatic in its approach to volatile wholesale energy markets as the year unfolds.”
Support below levels in Europe
The steel industry also welcomed the launch of the scheme but warned that it falls short when compared to the support available in European countries, such as Germany.
UK Steel said the extended support will provide a critical shield against high energy prices. But Gareth Stace, director general of UK Steel, feared that domestic steelmakers will continue to suffer a ‘competitive disadvantage’.
The BBC quoted Adrian Hanrahan, managing director of Robinson Brothers, a chemicals producer in West Bromwich, welcomed the government's new energy support scheme: "All help is very, very welcome."
But he said: "We're a small company, our energy is tripling this year which means that being a small company we have one pot of money.
"I fear that redirecting our money away from innovation into basically survival is not a good thing for the business and it's not a good thing for UK PLC either."