All UK businesses to have energy bills capped under new government scheme

Economists have told ITV News that the government's scheme will help a broad range of businesses and for the moment is 'almost certainly the best that can be done', as Romilly Weeks reports.

Energy costs for all UK businesses, charities and public sector bodies will be cut as part of a huge relief package, the government has announced.

The new Energy Bill Relief Scheme will provide a discount to all firms for six months from October 1.

Wholesale energy costs will be capped at "less than half" for all non-domestic customers under the scheme, in a bid to protect them from soaring prices so they are "able to get through the winter".

Hospitals, community halls, schools and care homes as well as restaurants, pubs, hairdressers, manufacturers and other non-domestic consumers will be covered by the cap.

'Of course today's help is very welcome, but hopefully there's more to be done'.

A parallel scheme will be established in Northern Ireland.

The announcement came after weeks of stark warnings of the devastating impact on the economy if the government failed to act, with thousands of businesses likely to close.

Under the scheme, wholesale prices are expected to be fixed at £211 per MWh for electricity and £75 per MWh for gas, which is less than half the wholesale prices anticipated this winter.

Under the plans, revealed by the Department for Businesses, Energy and Industry, the initial scheme will be replaced after six months with a targeted system focused on the most vulnerable industries like retail and hospitality.

Business Secretary Jacob Rees-Mogg would not be drawn on the industries and businesses that will get longer term support - but hinted schools, care homes and hospitals could.

Liz Truss confirmed to ITV News on Tuesday that the longer-term financial support will apply to vulnerable businesses "like pubs", who are less likely to be able to invest in their own energy supply.

Business Secretary Jacob Rees-Mogg is conducting a review to determine exactly which types of businesses will receive support on a longer-term scale, Ms Truss said.

That review will be completed within three months - but Mr Rees-Mogg would not be drawn on the criteria for determining which businesses will receive more than six months' worth of help.

However, he hinted that help for schools, hospitals and care homes could continue in a year.

ITV News Political Editor Robert Peston explains how the government's relief package for businesses will fit into its mini budget announcement.

“Schools and hospitals and care homes are obviously going to (need to) be able to afford their energy in a year’s time as well as today," he said.

“I can’t announce future schemes, it would be wrong to do so, but we need to make sure that we use this time to find out where the support is needed."

When asked why the cap for households will last two years, but for most businesses it will only be six months, Mr Rees-Mogg explained the non-domestic market is more complicated with different contractual arrangements.

"What we needed now, immediately, quickly was something simple that would give people confidence through the winter," he said. "It's essentially recognising that there's an urgent problem now."

How will the scheme work and when will I see a discount?

The support will work differently depending on what kind of energy tariff an organisation is on.

The scheme will apply to fixed contracts agreed on or after April 1 this year, as well as to deemed, variable and flexible tariffs and contracts.

It will apply to energy usage from October 1 to March 31. There will be a review halfway through.

The savings will be first seen in October bills, which are typically received in November.

The cap will be automatically applied to the bills and firms do not need to contact their suppliers.

The level of support offered to companies with flexible purchase contracts, which include some of the biggest energy users, will also be capped, the government said.

Mr Rees-Mogg sets out how the scheme will work.

It said a pub using 4 MWh of electricity and 16 MWh of gas that signed a fixed-price contract in August could see its bill drop from £7,000 to £3,900.

Companies that are not connected to the gas or electricity grid will get some kind of equivalent support, although details will be announced later.

Following the initial six-month period, "vulnerable" industries - such as hospitality and retail - will continue to receive targeted support.

The government is currently determining exactly which businesses will be deemed eligible for the longer-term help.

It comes in addition to the £2,500 energy price cap on households in England, Scotland and Wales, also coming into effect on October 1.

Ministers will push through emergency legislation to underpin the new relief scheme once Parliament returns from its break for the party conferences in October.

Ms Truss said: “We know that businesses are very concerned about the level of their energy bills.

“That’s why we are putting in place a scheme for business that will be equivalent to the scheme for households to make sure that businesses are able to get through the winter.

“We’re going to review it after six months. We’ll make sure that the most vulnerable businesses like pubs, like shops, continue to be supported after that.”

Chancellor Kwasi Kwarteng said the government has acted to "stop businesses collapsing, protect jobs and limit inflation".

“And with our plans to boost home-grown energy supply, we will bring security to the sector, growth to the economy and secure a better deal for consumers," he added.

The existing scheme will be replaced after six months with targeted support for more 'vulnerable' businesses. Credit: AP

A central debate to politics recently has been on who will ultimately pick up the cost for such support schemes, with Sir Keir Starmer previously demanding to know who will "foot the bill" after she repeatedly ruled out a Labour-backed windfall tax.

He pointed out that energy companies are set to make £170 billion in excess profits over next two years and accused Ms Truss of leaving struggling families and businesses struggling to foot the bill for "decades to come".

Mr Rees-Mogg on Wednesday said he could not say exactly how much the energy schemes will cost but it will "undoubtedly" run into tens of billions of pounds of borrowing. This is at a time when inflation soars and debt interest reaches a record high.

"This is a burden that would fall on the economy one way or another," he said.

"Should it fall on individuals and businesses who simply cannot afford it or is it something that has to be bought collectively on a balance sheet that can bear it?

"But... this does have a cost."

How has the scheme been received?

Trade groups welcomed the support, but many worried that it would not be enough or last long enough.

Kate Nicholls, chief executive of UKHospitality, said: “This intervention is unprecedented and extremely appreciated as we head into an uncertain winter with numerous challenges on many fronts."

The government should reduce VAT and provide relief on business rates, she said, and ensure there is no cliff edge when support is removed after six months.

She said businesses will get “some confidence” from the support, but “we will not relent in our pursuit of a more comprehensive package to safeguard businesses and jobs”.

Matthew Fell, chief policy director at the Confederation of British Industry, said: “We welcome government’s quick and decisive action to provide hard-pressed businesses with a substantial short-term fix to a long-term problem."

Shevaun Haviland, director general of the British Chambers of Commerce, said: “Six months support is not enough to make plans for the future.

“We understand there are a range of unknowns for the government in looking ahead, but without further reassurance very few firms will make plans to invest or grow.

“Some businesses will still struggle to meet their bills despite this government intervention. The chancellor must prioritise those firms in his mini-budget on Friday.