Chancellor Kwasi Kwarteng is set to announce details about the Business Energy Support Package at the end of this week in a mini budget.
Since the announcement made by Liz Truss, after she became the new Prime Minister, that households and businesses will get support with energy bills, businesses are waiting to hear details.
While households have been given clarity on the maximum they will pay this winter, UK businesses have been left to wait for the Chancellor to announce the details about the business energy support package. These details will be given during a mini budget at the end of this week.
What The Business Energy Support Package Contains
While no details are yet known, we do know that businesses will also be covered by the new energy price guarantee, which means that energy bills for businesses will be capped. However, it is not clear at what price the bills will be capped for businesses.
We also know that the support will be in place for six months for businesses, unlike the support for households, which will last for two years.
After six months, only vulnerable sectors will receive further support. To decide which businesses will be classed as vulnerable, a review will take place after three months. It is likely that sectors with high energy uses will be classed as vulnerable.
The lack of details about the business energy support package has been criticised by businesses and industry bodies, as companies need certainty to plan for the months ahead.
We need urgent clarity on whether this cap will deliver for businesses and help them out of a crisis that has been building for months, and urge the chancellor to seriously consider what immediate reassurance he can give for the thousands of business owners currently in despair.Emma McClarkin, Chief Executive of the British Beer and Pub Association
Many businesses are also faced with the decision to give up or go on. Without clarity on how they will be supported this winter, it is difficult to make this decision.
Delays To Access Business Support Possible
After reports in the Financial Times that the business energy support package might not be in place by 1 October, the government has admitted that there could be a delay of some weeks.
However, a spokesperson for the government said that if there were delays, the payments would be backdated to October and insisted that the support would be in place before November.
The reason for the possible delays is the lack of an energy price cap for businesses. So a completely new scheme has to be introduced to support UK businesses with their energy bills.
It is also not yet clear if legislation would be needed to support businesses. According to the government spokesperson, this is a point that is still worked through. If new legislation is needed, further delays could occur.
The matter is further complicated by the complexity of energy contracts for businesses. Different sectors and companies use energy differently and in different amounts, and therefore their energy contracts need to be tailored to their needs.
This means one blanket business rate would not be easy to identify and implement.
This is why there are no ‘off-the-shelf’ options for businesses and contracts need to be tailored to meet the needs of each individual business. And this complexity makes it more difficult to impose one blanket rate across all businesses.Spokesperson for energy broker Bionic
Business contracts tend to be fixed for longer, up to five years, than household ones. And while households have the option to cancel a contract, sometimes by paying an early exit fee, businesses normally don’t have this option.
Most contracts will be up for renewal in October, which means business owners will have to make a decision without knowing what the government support will look like.
Others might only just have renewed their contract, which might be at a much higher rate. It is not clear how the new energy price guarantee will work for them and if the energy companies will revise their contract or let the companies cancel and move to the lower tariff.
Energy Crisis Could Lead To More Small Businesses Closing
As the cost-of-living crisis has hit households across the country, many had to think carefully about how they spent their money. And small businesses are impacted by this reduced spending the hardest.
According to government figures, in the month of August 1,933 businesses in England and Wales closed down, 43% more than in August last year.
This means in 2022 so far, 20,000 businesses have gone insolvent. This is an increase of 72% compared to last year. Which might only be the start, given the dire situation many businesses find themselves in.
A survey by Nucleus Commerical Finance has found out that 23% of business leaders in the UK are concerned about the survival of their businesses this financial year. 72% identified the cost-of-living crisis as the biggest threat to their business.
These figures show that it is vital that the government gives small businesses clarity and that the energy support package is fit for purpose.