By Nicholas Earl
Sadiq Khan has urged Jeremy Hunt to reconsider his plan to drastically cut support in energy bills, and has warned businesses now face “uncertain futures.”
The Mayor of London argued that supporting the capital’s businesses bounce back from the pandemic was a “huge part of ensuring our wider economic recovery.”
He said: “The Government must maintain support for businesses, charities and public sector organisations through the cost of living crisis, particularly the hospitality, retail and cultural sectors, which are especially at risk as households cut their spending.”
Businesses groups have also slammed the Chancellor’s decision to slash support for energy bills from April – effectively replacing a cap on prices with a discount, which many say won’t support businesses if energy bills continue to sit at elevated levels.
Martin McTague, National Chair of the Federation of Small Businesses (FSB) said tonight he feared that companies would struggle to “survive on the pennies” offered in the latest package.
He argued Hunt has decided to “all but eliminate help,” and labelled the new package as “out of touch” with the realities facing businesses facing sky-high energy bills.
McTague predicted the Government “will have to come back” to the table and offer more help in the coming months.
The FSB chair warned: “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.”
We are aware of the pressure that public finances are under, but energy costs are the single biggest threat to the industry right now to once strong healthy businesses.
Emma McClarkin, chief executive of the British Beer and Pub Association, was also scornful of the new package, criticising the reductions in the support package as “extremely worrying.”
She warned that the hospitality sector remains highly vulnerable to energy bills, with falling gas pricesnot expected to be felt in running costs until later this year.
The industry boss feared price increases will be the `’last straw for businesses” which have been struggling for three years to remain solvent and serving their communities.
She said: “We have been clear with Government about the continued vulnerability of businesses across our industry and the ongoing challenges pubs and breweries face.
“We are aware of the pressure that public finances are under, but energy costs are the single biggest threat to the industry right now to once strong healthy businesses. ”
The latest round of industry criticism over support packages follows polling showing that over half (51 per cent) of businesses with customer-facing premises such as shops, hairdressers, nurseries, cinemas and gyms will be forced to raise prices if the Energy Bill Relief Scheme scheme is not extended.
The research from Uswitch also revealed that one in five (20%) public-facing businesses such as hotels, beauty salons and gyms, believe they will needed to take equally drastic action such as closing some operations, downsizing or restructuring the business.
More than one in seven (13 per cent) argued they will have no option other than to reduce overall staffing.
Hunt unveils reduced package for businesses
Hunt has today finally unveiled the new Energy Bills Discount Scheme, which is capped at £5.5bn for 12 months from April and will only apply to 70 per cent of energy used by businesses.
The new package will offer a discount up until wholesale gas prices exceed a price threshold.
For electricity, this threshold is £302 per megawatt hour (MWh) and for gas, £107 per MWh.
It also includes a maximum discount for energy intensive industries such as manufacturing- set at £40 per MWh for gas and £89.10 per MWh for electricity, unlike the current Energy Bills Relief Scheme which expires in March.
The Chancellor is eager to reduce the exposure of taxpayers to historically elevated wholesale costs in volatile energy markets.
The Energy Bills Relief Scheme is estimated to have cost taxpayers at least £18bn over it’s 18-month duration.
The aim of the new package is to help businesses locked into contracts signed before recent substantial falls in gas prices, while helping them face the new reality of higher energy bills from pre-crisis levels.
In a Treasury statement, Hunt confirmed his “top priority is tackling the rising cost of living – something that both families and businesses are struggling with.”
This meant taking “difficult decisions to bring down inflation” while also “giving as much support to families and business as we are able.”
He 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.”
The Chancellor has also confirmed he has written to Ofgem boss Jonathan Brearley, asking for an update on their review into the non-domestic market.
This follows reports from businesses that they have faced challenges in securing Government discounts in their contracts, with renewal costs and standing charges driving up their bills.
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