Energy bill help for firms expected to be halved

Business groups expect government help on their energy bills to be halved after March when the existing support package expires.

Chancellor’s allies said support would be significantly reduced to protect public finances from volatile energy markets.

Gas and electricity prices were set for businesses through the end of March, but many want support to continue.

The revised program is expected to run for 12 months through March 2024.

The BBC understands that Chancellor Jeremy Hunt will meet business groups on Wednesday lunchtime to brief them on the Government’s plans to support energy bills for non-domestic energy consumers once the current package expires.

The Federation of Small Businesses, UK Hospitality, the CBI and the British Chambers of Commerce are expected to attend the meeting.

The details of the support companies will receive for their energy costs are expected to be announced next week.

Unlike households, commercial businesses are not subject to an energy price cap during normal times, which limits the amount that utilities can charge per unit of energy.

But after energy prices soared last year, the government’s Energy Bill Relief Scheme fixed the costs and offered a lifeline to many companies that were at risk of going bust without the support.

In October, the government said it would review the program because of the high cost to taxpayers, with officials considering options to extend support only to “vulnerable businesses”.

A decision to extend support was due before Christmas but was postponed by the government until the new year.

Firms and business groups reacted angrily to the delay, with UK Hospitality chief executive Kate Nicholls describing it as having “a corrosive effect on business confidence”.

The delay is believed to be due to the complexity of implementing the government’s initial goal of segregating different sectors according to need for different levels of support.

It is impossible to predict exactly how much ongoing support, which ran from October, will cost the Treasury as this depends on the difference between wholesale energy prices and the level of any cap.

However, the Office for Budget Responsibility estimated the cost of the business support scheme at nearly £20bn for the six months to March 2023.

Halving that support but extending it by a full year could cost a similar amount, but Treasury sources pointed to lower wholesale energy prices year-on-year and expect the headline bill to be lower.