Consultants and industry groups raise alarm over April’s reduction in government supportBritish businesses are facing an energy-cost cliff edge in April when the introduction of a weaker government support package leads to a jump in bills, trade bodies and analysts warn.
A government support program that began in October and continues until March ended up to protect companies from high energy prices this winter. However, its replacement will continue until April 2024. It is less generous.
Wholesale gas prices dropped this week, but are now about three times what they were in October. This leaves energy costs high and many companies exposed.
Cornwall Insight, an energy consultancy, warned of a “precarious edge when the business support program ends”, with some businesses facing a 70 to 80 percent increase in their gas and power bills.
Robert Buckley, Cornwall’s head for relationship development, stated that companies would have to adapt to high energy prices. However, some could be affected by this. “The higher your energy bills are, the more you can invest in your business.”
Arjan Geveke is the director of Energy Intensive Users Group, which includes steel, chemical, and ceramics producers. He warned that the sharp drop in government support compared to other European countries could lead to some manufacturers being at a greater “competitive disadvantage”.
He said that industrial electricity prices in the UK were higher than in other countries, even though they increased in 2022 due to higher network charges.
Geveke said that France, Germany, and Italy all have extended and increased support to energy-intensive users in response to the conflict in Ukraine. However, energy prices in the US are still much lower than those in Europe.
The EIUG stated that, “Although it is welcome, the amount of relief that the UK government proposes providing from April still places UK energy-intensive users in a competitive disadvantage international.”
Individual contracts will determine the extent of price increases. However, businesses that signed rates at the peak in August last year will be most affected by the reduction in government support.
Buckley stated that there will be a few customers who have saved a lot over the summer and can now not benefit from wholesale prices at a lower price.
Emma McClarkin is the chief executive of British Beer and Pub Association. She stated that energy costs are the industry’s “biggest threat”.
She stated that the April drop in support was deeply concerning, and business owners are uncertain of what the next twelve months will bring. “We need the government’s support to keep suppliers in line with passing down drops in wholesale energy prices.
Tina McKenzie is the policy chair of Federation of Small Businesses. She called for assistance for “vulnerable” businesses, and said that energy retailers should permit them to renegotiate contracts to take advantage of recent drop in wholesale prices.
The FSB wants the government to create a Help to Green voucher of approximately PS5,000 to aid companies in cutting energy costs and boosting renewables.
Cornwall Insight, a company that works closely with suppliers, stated that most companies have paid their bills, but there were concerns about “bad debt” once the scheme ends.