UK energy support measures for firms a ‘massive disappointment’ – business live

Key events

Shapps: Falling wholesale energy prices should be passed on

Business secretary Grant Shapps says energy suppliers need to pass on falling wholesale energy prices to customers, such as businesses.

Speaking on the Today programme, Shapps insisted that the government doesn’t want to see small businesses go under due to high energy prices, as the Federation of Small Businesses warns could happen.

Nor should that be the case, Shapps argues, pointing out that wholesale gas prices are lower than they were before Putin invaded Ukraine, but still historially high.

The problem, though is that this isn’t being felt by businesses in their energy bills, Shapps points out

Shapps says ministers are very concerned that customers benefit from falling wholesale prices, saying:

One of the things the Chancellor and I are very concerned about is those wholesale prices, which as I say, have now come down again, making sure that’s passed on to the end users and those businesses.

So we’ve written to Ofgem to ask them to review the market and how that’s operating to make sure that it’s wholesale prices lead to lower prices for those businesses as well.

The day-ahead wholesale UK gas price over the last two years Photograph: Refinitiv

The Night Time Industries Association, which represents firms which typically operate between 6pm and 6am, fears that the scaling back of non-domestic energy bill support will cost jobs.

Michael Kill, CEO of NTIA, said last night’s announcement showed how “out of touch” the Government are with businesses.

Kill added:

“Even under the current relief scheme, greedy, profiteering energy companies are subjecting businesses to over 400% increase on previous energy bills.”

“All of this in light of the fact that gas/oil wholesale prices in recent months have dropped below the levels prior to Russia’s invasion of Ukraine.”

“The scaling back of the energy relief scheme by Government at the end of April, will without doubt mean thousands of businesses and jobs will be lost in the coming months.”

IoD: Some vulnerable SMEs may cease trading

The Institute of Directors are disappointed that there isn’t targeted support for the hospitality sector in the government’s new energy support package.

Alex Hall-Chen, principal policy advisor for Sustainability, Skills and Employment at the IoD, says businesses will be reassured that some support will continue for a further twelve months beyond the end of March.

But, she warns, shifting to a discount on energy bills rather than the current fixed cap will create more uncertainty for firms, making it harder to budget.

It could force some struggling small firms under, Hall-Chen says:

“However, whilst many manufacturers will also receive additional support, it is a shame that the government has not found a way to target other firms most exposed to volatile international energy markets, such as those in the hospitality sector.

“The design of the new scheme will also provide less certainty for businesses in budgeting. Given that future energy costs will no longer be able to be projected with any degree of confidence, the willingness of directors and auditors to sign off their entities as going concerns will be impaired. In the case of the most vulnerable SMEs, this may affect insolvency assessments and lead some companies to cease trading altogether.”

Introduction: FSB says energy support package is 'massive disappointment'

Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.

The UK government’s new energy support packages for businesses does not go far enough to protect companies from the shock of gas and electricity prices, industry groups are warning.

Under the plan, announced last night, non-domestic users will receive reduced support for their energy bills from the end of March. Rather than a fixed cap on energy costs, there will be a reduction to wholesale prices, for a year.

Martin McTague, National Chair of the Federation of Small Businesses, fears that small firms are being “left at the mercy” of the economic war being waged by Vladimir Putin, who drove up gas prices last year.

He told Radio 4’s Today Programme that the new scheme is a “massive disappointment”, and will hardly scratch the surface for many businesses.

The new plan means non-domestic energy customers – including businesses, schools and charities – will automatically receive a discount of £6.97 a megawatt hour for gas and £19.61 a MWh for electricity. James Cartlidge, the exchequer secretary to the Treasury, said this was the equivalent to a £2,300 saving for a pub, or £400 for a typical small retail store.

But businesses with energy costs below £107 a MWh for gas and £302 a MWh for electricity will not receive support.

McTague points out that around one in four small businesses have said they’d be in trouble if there was a big increase in wholesale energy prices in March.

They’ve already spent £18bn getting this far. It seems absolutely crazy to abandon so many firms when they’ve spent so much money getting them through the winter.

The government has said the existing package, which expires at the end of March, was unsustainable – Cartlidge pointed out last night that “it is not for the government to habitually pay the bills of businesses.”

McTague, though, points to the shock suffered by businesses last year, saying it it is “completely unrealistic” to think that small businesses can adapt to the new energy landscape in six months, over the winter.

They have to have a realistic timetable in which they can adapt to the new, much higher prices.

Otherwise, what you’re essentially doing is leaving them at the mercy of Putin.

Last night, McTague warned that 2023 “looks like the beginning of the end for tens of thousands of small businesses”.

The steel industry has welcomed the launch of the Energy Bill Discount Scheme [EBDS], but warned that it falls short when compared to the support available in European countries, such as Germany.

UK Steel say the extended support will provide a critical shield against high energy prices. But… Gareth Stace, director general of UK Steel, fears that domestic steelmakers will continue to suffer a ‘competitive disadvantage’:

The Government is betting on a calm and stable 2023 energy market, in a climate of unstable global markets, with the scheme no longer protecting against extremely volatile prices. The German Government guarantees an electricity price of €130/MWh for the whole of 2023, ensuring German industry can continue to operate competitively within Europe and beyond.

In contrast, the reformed EBDS provides a discount for electricity prices above £185/MWh, leaving UK steel producers paying an estimated 63% more for power than German steel producers this year. This situation will maintain a long-standing competitive disadvantage for UK producers, resulting in higher production costs and a reduced ability to compete this year.

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