• Swindon & Wiltshire News
• Thursday September 22 2022
• Author Name: Peter Davison

Government’s energy price cap welcomed by businesses

The government has announced new support for businesses in the form of an energy price cap to get them through the winter.

The Energy Bill Relief Scheme will come into force on October 1, and run for six months.

The government has set a Supported Wholesale Price – expected to be £211 per MWh for electricity and £75 per MWh for gas, less than half the wholesale prices anticipated this winter – which is a discounted price per unit of gas and electricity.

It is equivalent to the wholesale element of the Energy Price Guarantee for domestic households.

Announcing the measures yesterday (Wednesday) prime minister Liz Truss said: “I understand the huge pressure businesses, charities and public sector organisations are facing with their energy bills, which is why we are taking immediate action to support them over the winter and protect jobs and livelihoods.”

Chancellor Kwasi Kwarteng said: “We have stepped in to stop businesses collapsing, protect jobs, and limit inflation.”

The move was broadly welcomed by business groups, which had been campaigning for help, warning that high energy prices could put some firms out of business for good.

Shevaun Haviland, director general of the British Chambers of Commerce, said: “For months we have been calling for government intervention to help businesses with eye-watering energy costs. This support package is significant and will ease the cost pressures that have been piling up on businesses.

“It will allow many firms that were facing closure, or having to lay off staff or reduce output, to keep going through the winter.”

Tina McKenzie, policy and advocacy chair at the Federation of Small Businesses said: “This is a substantial move and will likely be of considerable help to small firms which have been crying out for months for measures to limit the pain caused by spiralling energy prices.

“Today’s announcement will give certainty for the next six months, but a tough year remains ahead of many small firms.”

Matthew Fell, chief policy director at the CBI, said: “The package will ease worries about otherwise viable businesses shutting up shop and smaller companies especially will benefit from the discounted rate.

“Businesses will also want to know more about the exit strategy and what happens when the six-month cap runs out. Working closely with business will be key to successful implementation.

“The long-run solution is to double-down on energy security and to incentivise firms to push ahead with ambitious energy efficiency programmes to lower demand.”

Jonathan Geldart, director general of the Institute of Directors, said: “This is an important intervention by the government and provides much-needed short-term reassurance for the numerous firms that are facing soaring energy bills.

“We particularly welcome the decision to include all contracts signed since April 1 within the scope of the new arrangements, and also the commitment to work with suppliers to ensure all businesses currently on variable contracts have the option of a fixing rate deal that benefits from the government support price.

“Currently around one in four firms are on variable arrangements so it is important they are now given maximum certainty to help them plan.”

Locally, Claire Ralph, policy manager at Business West, said: “Business West welcomes details announced today on the Energy Bill Relief Scheme for businesses across the South West which provides an element of certainty, for a limited time.

“This support provides businesses vital breathing and planning space to manage cashflow and profitability through the winter months. Business West on behalf of firms across the region calls on early clarity of longer-term protection the Government has promised for ‘vulnerable’ customers given the potential for a cliff edge on 1 April 2023 if this isn’t well targeted.”

Mike Lloyd, managing partner of accountancy firm Haines Watts Swindon, which has been advising SMEs in Swindon and Wiltshire on planning for the crisis, said: “It has to be a good thing for business, particularly as interest rates are set to continue rising.

“Whether it is enough will vary from business to business but the discounts are bringing the costs to business well below current wholesale prices.

“Is it for long enough? We can only see what happens to the energy markets over the next six months. It may well need to be extended over and above ‘the at risk’ sectors that are already looking set to get longer term support but whether it will be. It is too early to say.

“Like Covid-19 it will have to be paid for by this and future generations and the ability to do that will depend on the strength of our post-Brexit economy.”

And Michael Blaken, accounts director at Optimum Professional Services in Swindon, which has also been helping its business clients plan for a possible winter of spiralling energy bills, said: “The Energy Bill Relief Scheme is a good first step for the Government to help relieve the pressure of soaring fuel prices for businesses in Wiltshire.

“It’s a price reduction as opposed to a price cap, therefore the treatment is different to the domestic market that people are starting to experience.

“Of course this only lasts for six months from October, so – unless prices begin to fall considerably – we’d like to see further help from next April.

“In the meantime, our advice as accountants is for businesses to do all they can to reduce costs, without compromising the level of service they offer to customers.”