Business Secretary Jacob Rees-Mogg unveiled details of the scheme on Wednesday 21 September, which will provide a discount on wholesale gas and electricity prices equivalent to the Energy Price Guarantee put in place for households.
Jonathan Geldart, director-general of the Institute of Directors (IoD), called it “an important intervention” by the government which provided “much needed short-term reassurance for numerous firms facing soaring energy bills”. CEO of UK Hospitality, Kate Nicholls, called it “unprecedented and extremely welcome” for “hospitality businesses facing an uncertain winter”.
The IoD particularly welcomed the decision to include all contracts signed since April within the scope of the arrangements, said Jonathan Geldart, and 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 businesses are on variable arrangements, he said, “so it is important they are now given maximum certainty to help them plan”.
The scheme will automatically apply to energy usage from 1 October 2022 to 31 March 2023; and to fixed contracts agreed on or after 1 April 2022; as well as to deemed, variable and flexible tariffs and contracts. It will run for an initial six-month period for all non-domestic energy users. A Supported Wholesale Price has been set – expected to be £211 per MWh for electricity and £75 per MWh for gas, which the government said was “less than half the wholesale prices anticipated this winter” – and green levies paid by non-domestic customers who receive support under the scheme will be removed.
While many sectors hailed the scheme – the hospitality sector “particularly welcomed its inclusiveness… from the smallest companies to the largest”, Kate Nicholls said – a few sounded a note of caution.
Geoff Barton, general secretary of union ASCL, warned the “glaring problem” is that the scheme is time-limited to six months, which “makes it impossible for schools and colleges to plan financially… because they could be knocked off course at a later date by steep rises to energy bills”.
Jon Collins, CEO of LIVE, said support needs to be sustained past the next six months, and called for the UK’s contemporary live music sector to be included on the government’s list of ‘vulnerable’ sectors. “Spiralling energy prices have already forced music venues and festivals to close or curtail programming, and this will begin again as soon as this support is removed,” Collins said.
Resolution Foundation economist Emily Fry said the government’s support package was “welcome, but expensive, and could easily cost over £100bn”. While she believed the scheme “[struck] the right balance of preventing firms being hit with soaring energy bills this winter, while encouraging them to become more energy efficient, and avoiding giving support to firms on longer-term energy contracts who don’t need it”, she cautioned that it requires “another large cheque” from a government already grappling with higher borrowing and that “cheque is not blank”.
“The refusal to cover more of this cost with windfall and solidarity taxes will add pressure on the Bank of England to up the pace and scale of interest rate rises, which will start to be felt by mortgagors in the months ahead,” Fry added.
Jonathan Geldart said the IoD would work with the government to ensure any further relief is targeted at industries and sectors “whose survival is most threatened by current economic conditions”, but noted: “Ultimately, however, business and government will need to work hand-in-hand to develop domestic energy sources and reduce consumption and dependency on expensive fossil fuels.”
