Business Energy Prices to be Cut by Half

Business energy prices for UK businesses will be cut by around half their expected level this winter under a huge government support package. The scheme will fix gas and electricity prices for companies for six months from 1 October, in a bid to stop firms facing soaring costs from going bust. Hospitals, schools and charities will also get help, the government said.

It comes after ministers announced a £150bn plan to help households with their soaring bills for two years.

Industry groups welcomed the package but warned further support may be needed after the winter.

The BBC is reporting that it understood the scheme will be reviewed after three months with an option to extend support for “vulnerable businesses” – but it is not known what sectors come under the category.

Under scheme:

  • Wholesale prices are expected to be fixed for all non-domestic energy customers at £211 per MWh for electricity and £75 per MWh for gas.
  • Companies do not need to contact suppliers as the discount will automatically be applied to bills, with savings seen from October but received from November.
  • The scheme will apply to fixed contracts agreed on or after 1 April, and variable and flexible tariffs and contracts.

Prime Minister Liz Truss said the government understood the “huge pressure businesses, charities and public sector organisations are facing with their energy bills”.

“As we are doing for consumers, our new scheme will keep their energy bills down from October, providing certainty and peace of mind,” she said.

“At the same time, we are boosting Britain’s homegrown energy supply so we fix the root cause of the issues we are facing and ensure greater energy security for us all.”

The support will apply to all non-domestic energy customers in England, Scotland and Wales. A parallel scheme, based on the same criteria and offering comparable support, will be established in Northern Ireland.

Officials have not said how much the package will cost the taxpayer, as it will depend on what happens to wholesale market prices between October and April, when the support expires.

Energy-intensive industries such as steel manufacturers have raised concerns about their energy costs, which have surged following Russia’s invasion of Ukraine.

Unlike households, businesses are not covered by an energy price cap, which is the maximum amount a supplier can charge per unit of energy. It means non-domestic bills have soared even higher.

It is understood that developing a support package for business has been more complex than for households as there are a bigger variety of contracts across different sectors.

Stephen Phipson of Make UK, which represents UK manufacturers, said businesses would “warmly welcome” the government support.

“Government has delivered a scheme which is simple to understand, giving reassurance to the business sector and making immediately available the much-needed help companies have been calling for across the board at a time energy costs were spiralling out of control.”

However, Mr Phipson warned that energy prices were likely to remain high for more than the six-month duration of the scheme and firms may need “support for a longer period if we are to protect jobs and remain competitive”.

Director General of UK Steel, Gareth Stace, said the price cap would give steel makers “the chance to get through the winter”. But he called on the government to “rapidly reform the energy market to ensure longer-term competitive prices beyond the current price”.

Smaller businesses have also been struggling with rising bills, with brewery bosses warning pubs and restaurants across the UK will be forced to close due to energy costs soaring by as much as 300%.

A landlord of one pub in Essex told the BBC his energy bill had risen from about £13,000 a year to £35,000.

Kate Nicholls, chief executive of UKHospitality, said the industry was “relieved” by the support ahead of the busy Christmas trading period.

“The inclusiveness of the support announced today – covering businesses small and large – will be extremely beneficial to the sector… A sector that provides a huge number of jobs, many of which are now more secure.”

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