On Thursday the new Prime Minister, Liz Truss, has announced her Energy Bill Support Scheme to help households and small businesses through this winter.
Soaring energy prices have pushed many small businesses in the UK to the brink, who were still recovering from the impact of the COVID-pandemic.
Many were facing a tough winter, with energy prices set to rise further. But now the new government has stepped in, handing small UK businesses a lifeline with the Energy Bill Support Scheme.
What The Energy Bill Support Scheme Includes
Liz Truss has announced that the price cap (which only applies to domestic households) will be replaced by the new Energy Price Guarantee.
The new guarantee will ensure that a typical household will pay no more than £2,500 per year on gas and electricity. However, consumers will still be charged by use, so households who use more energy will be paying more as well.
The new Energy Price Guarantee will be in place for the next two years and will come into effect on 1 October 2022.
All households will also receive the £400 support payment that former Chancellor Rishi Sunak has brought in, which will be paid in six instalments from October.
The Prime Minister has also said that the £150 green levy will be removed from domestic energy bills and will be paid for by the Exchequer. This is part of the average £1,000 saving that households will see as part of the Energy Price Guarantee.
There will be additional support for people who fall outside this scheme, but for which no details have been released yet.
The government claims that these measures will reduce inflation by 5%. This means that prices should come down, which will be a welcome relief for many families.
This is also good news for small businesses, because it means that their running costs are also likely to ease. It might also mean that consumers are more willing to spend again, giving businesses and the economy a boost.
What Help Businesses Get
While businesses are not protected by the price cap, the Prime Minister has announced that the Energy Price Guarantee will also cover the energy bills of UK businesses. This means there will also be a price cap on what energy companies can charge businesses.
Unlike for households, businesses are only covered by the new price guarantee for six months starting on 1 October 2022. Afterwards, the government has said vulnerable industries will continue to get support.
However, no details have yet been released about which industries will be classed as vulnerable. After three months, a review will take place, which will decide on who will get further support.
While the support will be greatly welcomed by small and medium-sized enterprises (SMEs) in the UK, there are still a lot of questions, as the announcement did not provide much detail.
For example, it is not yet known how the Energy Bill Support Scheme will work for businesses who have already seen their energy bills increase and who had to fix-in at a high tariff. No details have been given about whether these businesses can renegotiate to bring down their bills to an affordable level.
Equally, it remains to be seen if energy companies will recalculate quotes and contract offers to reflect the lower price.
It was also pointed out that businesses tend to get quotes from energy companies for a 12-month period. And it is unclear how this will work with the 6-month price cap.
Industry bodies have also raised concerns about what will happen after the six months, warning that support can’t suddenly stop after this period.
This must not result in a cliff-edge after six months, with the withdrawal of support to all but ‘vulnerable’ targeted industries, sectors or types of business. The definition of who falls in and out of that support will need to be looked at carefully at the three-month review.Martin McTague, National Chair of the Federation of Small Businesses (FSB)
Liz Truss has also announced that the Chancellor, Kwasi Kwarteng, will give a fiscal statement later in September, which is said to contain other measures aimed to support businesses and households as well as give details on how the Energy Bill Support Scheme will be paid for.
Government Will Borrow More
While it is estimated that this scheme will cost the new government £100bn or £150bn, as some reports say, the exact figures will only be revealed at the fiscal statement later this month.
But it is already clear that the scheme will be paid for by increasing government borrowing, rather than through a “windfall tax” on the sky-high profits of energy companies.
This has been called for by the opposition, but Liz Truss has already made clear during her campaign to become leader of the Conservative Party, that she is against such a “windfall tax”.
So while the exact details are not yet known, help is coming for small businesses to support them through the winter.