Energy bill support for businesses to be reduced from April, government confirms

Critics have said businesses haven't been left with much time to plan for the changes. Credit: PA

The government has promised to help businesses with their energy bills for another year, but significantly reduced the amount of support they will get.

Under the new scheme, firms will get a discount on wholesale prices rather than have their costs capped like the current one in place for businesses.

Ministers said that non-domestic customers – which include businesses, charities and schools, among others – would get up to £6.97 taken off their energy bills for every megawatt hour (MWh) of gas they use.

Electricity bills will also be discounted by up to £19.61 per MWh.

It will deliver billions of pounds of support to companies over the 12 months from the start of April, however it is considerably less generous than the support they currently get.

The current scheme is set to cost the government about £18 billion over just six months, compared with £5.5 billion over a whole year for the new plan.

The plan was welcomed by the Confederation of British Industry, which said it would “provide respite for many firms”.

“It’s unrealistic to think the scheme could stay affordable in its current form, but some firms will undoubtedly still find the going hard,” said CBI director for decarbonisation policy Tom Thackray.

“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.”

The government also announced that energy-intensive users, such as some factories that burn a lot of gas, will get extra support.

Those businesses that are eligible will get a maximum discount of £40 per MWh of gas and £89.10 per MWh of electricity. It will apply to 70% of their energy use by volume.

Chancellor of the Exchequer Jeremy Hunt said: “Wholesale energy prices are falling and have now gone back to levels just before Putin’s invasion of Ukraine.

“But to provide reassurance against the risk of prices rising again we are launching the new energy bills discount scheme, giving businesses the certainty they need to plan ahead.

“Even though prices are falling, I am concerned this is not being passed on to businesses, so I’ve written to Ofgem asking for an update on whether further action is needed to make sure the market is working for businesses.”

Although it was welcome, the original energy support package for businesses was always seen as a short-term measure.

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It was first announced in September under then prime minister Liz Truss. But while the government promised to support households for two years, non-domestic customers were told their support would run out in just half a year.

SNP economy spokesman Stewart Hosie said he suspected businesses will be “underwhelmed and disappointed” by the energy support announcement, adding they do not have much time to plan.

Mr Hosie sought assurances that the package of support and level of discount will be reviewed before next winter if it turns out to be a “medium-term price problem” rather than a short-term shock for businesses.

Chancellor of the Exchequer Jeremy Hunt Credit: Aaron Chown/PA

Treasury minister James Cartlidge defended the UK Government’s support package, adding in the Commons: “I do think we need some perspective here – £5.5 billion is roughly the cost of a 1p cut in income tax. That remains a very significant fiscal intervention.”

Shadow Treasury minister Abena Oppong-Asare accused the government of having “strung businesses along, playing for time”.

The Labour frontbencher told MPs: “It is criminal that the sticking plaster politics has forced British businesses into the same cycle – firms unable to plan, not knowing what the next month will bring, let alone the next quarter.

“Business owners and their staff have faced two Christmases racked with worry because of Covid and half-baked announcements from this Government.”

Ms Oppong-Asare called on Mr Cartlidge to apologise for the “distress and uncertainty caused by the government”.

Mr Cartlidge, in his reply, said: “(Ms Oppong-Asare) used the word ‘criminal’ to describe the announcement today, I think that’s a little bit over the top. We’re continuing to provide significant support for businesses.”