Reduced Energy Support For Businesses From March

Earlier this year, the government confirmed that they would reduce the support for business energy bills from March. This will be bad news for any companies that have struggled to remain afloat in the post-coronavirus landscape, but thankfully it’s not being withdrawn entirely.

On Monday, 9th January, MP James Cartlidge, the Exchequer Secretary to the Treasury, said that £5.5 billion would be allocated to businesses as “transitional support” on the 1st of April 2023 and last for twelve months. However, he also advised that it is “not for the government to habitually pay the bills of businesses.”

The Energy Bill Relief Scheme

The previous scheme had been running since October and allowed businesses to cap the unit cost of their energy bills. The treasury funded a discount that covered the difference between wholesale prices and a “government-supported price” of £211 per MWh for electricity and £75 per MWh for gas.

Starting in April, this will be replaced with an updated scheme that offers a discount on prices rather than capping them. Businesses, schools and charities will receive automatic discounts of £6.97 per MWh for gas and £19.61 per MWh for electricity. To put that into perspective, this is in the region of a £400 saving for a small shop.

However, there is a limit and any business with energy costs lower than £107 per MWh for gas, and £302 per MWh for electricity won’t receive any support. At the opposite end of the scale, manufacturers with high energy bills will receive a more significant discount equivalent to £7000 over a year, as international competition prevents them from passing the costs onto consumers.

Feedback From Business Owners

This announcement was greeted with concern, and several prominent business leaders have expressed their disappointment with the change. For example, Jonathan Andrew, CEO of Bibby Financial Services, stated:

“The Government’s rationale for dialling down energy bill support is understandable. But the past few years have served blow after blow for the UK’s small and medium sized enterprises as they bounce from one crisis to another. Low on cash, and short of resilience, too many will find themselves on the precipice of collapse come April unless other specific support is put in place.

“At this stage in the year, SMEs need stability and consistency to enable them to plan ahead and overcome challenges associated with unpredictable economic conditions. Sky high costs and interest rates are squeezing cash-strapped businesses at both ends. Ultimately, access to finance to enable cashflow and investment will be critical to businesses’ ability to ride out this storm. But, anecdotally, we know many are struggling to pay back loans, while others face finance blackspots with lenders retrenching from markets, and overall, there appears to be a lack of awareness of what financial support is on offer.

“Urgent action is required from the Government to provide clear direction to ensure SMEs can access finance, while ensuring the right level of support to keep them growing. Those SMEs that are equipped to build resilience and invest in their futures will play a vital role in leading the UK out of recession.”

His worries were echoed by Chirag Shah, CEO of Nucleus Commercial Finance, who said:

“Support for business has and continues to be in short supply. Extending the previous £18bn support package would’ve been a real lifeline for struggling businesses this year. But cutting this support to just £2.5bn for the next 6 months risks leaving the UK’s revenue generators high and dry as the recession bites. Challenges like this only highlight the importance of the commercial financial pipeline. It is essential that businesses – of all sizes – have ready access to lending they need so that they can focus on productivity and seize growth opportunities as they arise in this tougher climate.”

While the full impact of these changes remain to be seen, this is another challenge facing the market and businesses will have to adapt. We would encourage all entrepreneurs to consider their finances in great depth before the amendments come into effect, and be as well-prepared as possible.

In the meantime, we would suggest researching any areas where you can reduce your costs. Here at Business Quotes, we can compare services for EPOS systems, merchant accounts, vehicle tracking and more. If you’d like to see if you can save money in any of our specialist areas, click the banner below.