Why Was Energy Bill Support For Businesses Slashed By The UK Government?

In January 2023, the UK government announced a reduction in support for businesses’ energy bills, causing concern and confusion among many companies. The move has been seen as a part of the government’s efforts to reduce its spending and promote competitiveness in the energy market.

The UK Treasury has announced plans to spend £5.5 billion on discounts for businesses’ energy bills for 12 months starting April 1st, 2023. The previous support, estimated to have cost around £18 billion, was only meant to be time-limited and provided during the winter. The new measures will provide businesses with certainty over energy prices until spring 2024 by offering a discount on wholesale prices of gas and electricity, instead of capping their costs as in the current Energy Bill Relief Scheme.

The updated scheme will come into effect when the current support package ends in March and aims to strike a balance between supporting businesses and limiting taxpayer’s exposure to volatile energy markets. The new scheme will offer discounts of up to £6.97 per megawatt hour for gas bills and up to £19.61 per MWh for electricity.

Eligibility criteria will remain unchanged, with the scheme available to anyone on a non-domestic contract, including businesses, charities, public sector organizations, and others. The discount will be automatically applied by energy suppliers starting May 2023. Businesses running from home may not be eligible unless they use more than 50% of their energy for business purposes.

What has the Government said about this change?

The new programme, according to a statement from the government, strikes a compromise between helping firms and restricting public spending on subsidies at £5.5 billion.

Businesses that use energy-intensive production processes, such as those in the steel, glass, and ceramics industries, will receive a greater discount than other sectors.

Many companies have been grappling with the uncertainty surrounding their energy expenses through 2023 because a decision on the programme was supposed to be made in December.

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

He added that he was “concerned” that falling energy prices were not being passed onto businesses, saying he had written to the regulator Ofgem to ask whether more action is needed.

What has the reaction been to this announcement?

Responding to the Government’s announcement that energy support for small firms is to be slashed, Martin McTague, National Chair of the Federation of Small Businesses (FSB) said:

“Today’s decision to all but eliminate help through the Energy Bill Relief Scheme (EBRS) is a huge disappointment for small businesses. For those struggling, the discount through the new version of the scheme is not material. Many small firms will not be able to survive on the pennies provided through the new version of the scheme.

“This is so out of touch. Two pence off a kWh of electricity and half a pence off gas is totally insignificant for small businesses, despite costing billions to the taxpayer. The Government will inevitably have to come back.

“The current EBRS scheme provides certainty for a small business owner over their rates, and has made a material difference to the survival of many small businesses. The replacement scheme will do neither.

“While the New Year should be a time of optimism and excitement, 2023 looks like the beginning of the end for tens of thousands of small businesses, which have been relying on the government energy support to survive this winter.

Why has the UK Government decided to slash energy bill support for businesses?

One of the main reasons behind the reduction in support is the government’s efforts to control its spending. In recent years, the UK has faced significant economic challenges, including Brexit and the COVID-19 pandemic. As a result, the government has been under pressure to reduce its spending and find ways to balance its budget. Reducing support for businesses’ energy bills is one of the measures it has taken to achieve this goal.

Another reason for the reduction in support is to encourage businesses to become more energy efficient. The government believes that reducing the support for energy bills will incentivize businesses to find ways to reduce their energy usage and become more environmentally friendly. This will not only help the country achieve its carbon emissions reduction targets but also help businesses save money in the long run by reducing their energy bills.

Finally, the government’s decision to reduce support for businesses’ energy bills is also aimed at promoting competition in the energy market. By reducing support, the government hopes to create a level playing field for all energy providers, including new entrants, and encourage businesses to shop around for the best energy deals. This, in turn, is expected to lead to lower energy prices and more choice for businesses.

What other support is available to businesses?

In addition to the Energy Bills Discount Scheme, there are several other support programs available to businesses in the UK for energy bills. These may include:

1. Energy Saving Opportunity Scheme (ESOS) – a mandatory energy assessment scheme for larger businesses that aims to reduce energy consumption and costs.

2. Carbon Trust Energy Management – a support program that helps businesses to improve energy efficiency and reduce energy bills through a range of services, such as energy assessments and training.

3. The Enhanced Capital Allowance (ECA) – a tax incentive that allows businesses to claim 100% first-year tax relief on the cost of energy-saving equipment.

4. The Climate Change Agreement (CCA) – is a government scheme that offers businesses discounts on their Climate Change Levy (CCL) tax in return for making energy-saving improvements.

5. The Green Business Fund – a government-supported initiative that provides grants and loans to small and medium-sized enterprises (SMEs) for energy-saving projects.

These are just a few examples of the support programs available to businesses in the UK for energy bills. To find out more about the support options available, businesses should contact their energy supplier or the government’s Department for Business, Energy, and Industrial Strategy.

What shall I do if I cannot afford my business energy bill?

If you are struggling to afford your business energy bills, there are several options to consider:

1. Negotiate with your energy supplier: Contact your supplier to discuss your payment options and see if they can offer a payment plan. This may involve spreading the cost of your bill over a longer period of time.

2. Switch energy suppliers: You may be able to reduce your energy bills by switching to a different supplier who offers better rates.

3. Energy efficiency measures: Consider making energy efficiency improvements to your business, such as upgrading to energy-efficient equipment or improving insulation. These measures can help lower your energy bills over the long term.

4. Government support: The UK government provides several schemes to support businesses struggling with energy bills. For example, the Warm Home Discount Scheme provides a discount on electricity bills for eligible low-income households.

5. Charitable assistance: Charitable organizations may offer help with energy bills for those in need. Contact your local Citizens advice bureau for information on any available support.

6. Seek professional advice: If you are struggling with debt, it is important to seek professional advice as soon as possible. This may involve speaking with a financial advisor or debt charity. They can help you explore all of your options and create a plan to get back on track.