UK Government to cap energy bills for businesses from next month

The UK Government has announced it will cap energy bills for businesses from October 1, cutting the expected wholesale price in half.

Prime Minister Liz Truss said the package of support to protect firms from soaring energy bills will make sure businesses “are able to get through the winter”.

The announcement comes amid heightened calls from firms for certainty over electricity and gas costs to enable them to plan ahead after a summer of political inaction due to the Tory leadership contest.

Ministers have said that firms, schools, hospitals, charities and other non-domestic consumers will be covered by the scheme following warnings of the devastating impact on the economy if they fail to act.

The Government has already announced that bills for an average household in England, Scotland and Wales will be capped at £2,500 from October 1 – but while businesses have been promised equivalent support, they have been waiting for details as officials have been drawing up a bespoke scheme.

As businesses have not benefited from the existing energy price cap and are not always able to fix their energy price through fixed deals, many are reporting projected increases in energy costs of more than 500%.

Targeted system

The Government plans a six-month scheme for all non-domestic energy users, but this will then be replaced with a targeted system focused on the most vulnerable industries.

Liz Truss said:  “We know that businesses are very concerned about the level of their energy bills.

“That’s why we are putting in place a scheme for business that will be equivalent to the scheme for households to make sure that businesses are able to get through the winter.

“We’re going to review it after six months. We’ll make sure that the most vulnerable businesses like pubs, like shops, continue to be supported after that.”

She said the initial scheme “will apply from the first of October to make sure businesses have that security through the winter”.

Emergency legislation

The Government will push through emergency legislation to underpin the new relief scheme once Parliament returns from its break for the party conferences in October.

For customers on fixed-price contracts, if the wholesale element is above the new Government cap, the price per unit will be automatically reduced for the duration of the scheme.

Customers with default, deemed or variable tariffs will receive a per-unit discount up to a maximum of the difference between the Government rate and the average wholesale price over the period – the maximum discount is expected to be around £405 per MWh for electricity and £115 per MWh for gas.

For customers on flexible purchase contracts, typically those with the highest energy needs, the level of reduction will be calculated by suppliers, subject to the same maximum discount.

A parallel scheme will be established in Northern Ireland.

Responding to the announcement, Labour said the plans to cut energy bills has come too late for some firms.

Shadow business secretary Jonathan Reynolds said: “It is farcical that the Tories have been unable to tell businesses at the sharp end of the energy crisis what they plan to do to help them until now. Labour has been calling for support since the start of the year.

“Businesses have been crying out for detail on these plans and, even now, there are still questions about how much this will cost and who will pay for it.

“We have known a crisis of this scale has been coming for months and Conservative dither and delay has forced too many businesses to close, with the future still looking bleak.

“While the Tories prioritise the profits of oil and gas producers, Labour will always be on the side of business and the jobs they create.”

The Liberal Democrats described the Government’s scheme as a “temporary sticking plaster” that comes too late for some small firms.

Sticking plaster

Lib Dem Treasury spokesperson Sarah Olney said: “This temporary sticking plaster comes too late for the many small businesses that already closed their doors for the last time because they couldn’t afford soaring bills.

“The Conservatives have sat on their hands for months while treasured pubs, cafes and high street shops went to the wall.

“This delayed announcement will leave our small businesses, schools and hospitals under a cloud of damaging uncertainty. The Government have no plan beyond these next six months, paralysing businesses who need to make decisions for the long term. Support for high streets and public services should be in place for at least the next year and include measures to improve energy efficiency and cut bills in the long term.

“The announcement shows the Conservatives have no plan and no understanding of the pressures facing our businesses and public services.”

Kate Nicholls, chief executive of trade body UKHospitality, said: “This intervention is unprecedented and it is extremely welcome that Government has listened to hospitality businesses facing an uncertain winter.

“We particularly welcome its inclusiveness – from the smallest companies to the largest, all of which combine to provide a huge number of jobs which are now much more secure.”

Companies that are not connected to either the gas or electricity grid will get some kind of equivalent support, although details will be announced later.