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In an announcement to the House of Commons on the 8th of September, Liz Truss announced energy bill support for consumers and businesses.
She revealed that the energy price cap will be fixed at £2,500 a year for a typical home for two years from 1st October, and while there isn’t a price cap for businesses, Liz Truss has confirmed an equivalent guarantee for businesses for six months.
This means that energy costs for businesses will be capped at the same price per unit as consumers, but further details about business support are less clear.
The prime minister also said that this business support will be reviewed in three months. The chancellor will also be working with businesses over the coming months to see whether support should be more targeted to those that are vulnerable, for example, hospitality businesses.
A promising plan?
The announcement was a relief for many as it ensures that retail and hospitality will not be forgotten this winter.
But as the specific help has yet to be clarified, some trade bodies are concerned as the expected hit to businesses could in some cases be catastrophic.
For example, in a survey conducted at the end of August to British Independent Retail Association (Bira) members, 65% of business owners had said a price rise would force them to reduce the number of staff they had or reduce wages, while 40% were considering limiting opening hours, and 23% were looking to permanently or temporarily close their business once the proposed price hike came in October.
According to Andrew Goodacre, CEO of Bira, “Making the energy rate for businesses the same as consumers still imposes a 300% increase on energy bills for many businesses, and that will still cause hardship for those business owners. We also believe that any review over the next six months should have a broader remit of looking at all business costs.
“There is limited prospect of prices reducing in six months’ time, and so we cannot afford to see business rates increase in line with inflation just as this business support comes to an end.”
Emma Jones, founder of small business support platform, Enterprise Nation, also believes that clearer definitions of the incoming help are needed.
She explained, “Small businesses will be heartened to hear that support is coming. Too many viable companies are at risk of failure due to extreme energy cost increases. It’s the certainty for their customers over the next two years is the good news here.
“More information is still needed on what will happen after six months are up. Certainty is the difference between keeping a business going and closing it down. It is also crucial for growth plans.
“We encourage the Department for Business, Energy & Skills to urgently confirm who the new small business minister is to ensure that the voice of entrepreneurs and founders is not left out of this important discussion.”
Six months isn’t long enough
Another major concern is that the proposed help won’t be long enough, especially as it is set to be reviewed in three months.
Ian Gadsby, managing director of Salford-based business energy experts Ylem Energy, commented, “We welcome the fact the prime minister has recognised the energy challenge businesses face, however, the six-month guarantee does little to address the likely long-term increase in energy prices.
“The government is effectively sending a dangerous message to businesses, telling them they have six months’ protection. However, businesses will still be paying high prices on the cap – much more than historic levels. Despite the cap we estimate the cost of business energy to reach, at best, between 30p-40p/kWh under the proposed scheme, a price rise many will struggle to cope with.
“It’s encouraging that the government has acknowledged the vital role of businesses generating their own energy and the need to reduce consumption.
“However, a six-month window is not enough time for large energy users to implement a direct energy generation solution. I fear that unless support is extended to two years in line with the consumer support package, UK businesses will face another energy price cliff edge at the end of February.”
This sentiment was also felt by Mark Tufnell, president of the Country Land and Business Association (CLA), as he added, “The energy package announced by the Government today is welcomed to a degree, however a 6-month cap for businesses is too short a time horizon. A cap on the unit rate makes sense, but the Government must act to stop the increase in standing charges.”
Hope on the horizon for indies
But while the support might not be exactly what industry bodies were hoping for, it will help to improve consumer confidence.
As Mark Kacary, managing director at Norfolk Deli, explained, “My first thoughts are that the action to stop the uncertainty of what will happen in the next six months for businesses and two years for consumers is a good thing.
“At the very least it might mean customers will start believing they can visit independent retailers, that they can plan for Christmas without the fear that any money they have will disappear before they can use it.
“It does mean that from a business point of view we can be a little more hopeful that people will spend and with careful use of energy that we will get through to the other side wherever that might be.
“We’ll watch keenly to see what happens in six months and what support for hospitality and hopefully businesses which have to have chillers and freezers will get.