The UK government’s support to businesses to cope with the jump in energy bills is set to be slashed significantly from April, which will raise energy costs for industries by around 80% and put British businesses at an even greater disadvantage to compete internationally.
The support—in the form of discounts on wholesale gas and electricity prices for businesses—will not be not nearly as generous starting in April as it is now, because the government amended in January the energy bill relief scheme with the purpose of “limiting taxpayers’ exposure to volatile energy markets.”
Businesses and energy-intensive industries are struggling as-is, and a significant cut to support for energy bills would be another heavy blow to the UK manufacturing, heavy industry, and hospitality sectors, as well as small businesses, associations warn.
Energy-intensive industries have seen their energy costs soar over the past year after the Russian invasion of Ukraine sparked a rally in energy commodities and power prices.
The UK’s industries suffered from soaring energy costs last year, and despite some government support, they may have to announce further curtailment in production. For example, soaring energy bills threaten to collapse the UK’s ceramics industry. The industrial area around Stoke-on-Trent has seen difficulties over the past year, and some companies have had to close shop due to unbearable costs.
“Whilst we welcomed the Government’s non-domestic Energy Bill Relief Scheme as a lifeline, their announcement of a review sparked concern. We warned that if Government support was downgraded, then this industry would be on a cliff edge. The Government must not leave us in a precarious position,” Rob Flello, chief executive of the British Ceramic Confederation (BCC), said in December.
In January, the government unveiled a new “Energy Bills Discount Scheme” for UK businesses, charities, and the public sector starting in April. Under the new scheme, support for businesses will be slashed, which could raise their energy bills by around 80%, trade associations have warned.
The BCC welcomed the extension of the period of support but said that the new scheme is not as supportive or as far-reaching as the original one.
“UK ceramic manufacturers are still competing against unrestricted imports from countries that provide a far higher level of support to their own manufacturers,” Flello said last month.
The Energy Intensive Users Group said that the new scheme “falls short compared to what other European countries provide.”
Businesses in the hospitality industry warned that energy bills could rise by 82% when the government’s support is significantly reduced in April. Even before the support ends, businesses expect a 101% surge in energy bills this quarter, compared to the same period last year, according to a joint Q1 Hospitality Members Survey by UKHospitality, the British Beer and Pub Association, the British Institute of Innkeeping and Hospitality Ulster.
“The hike in bills is significantly affecting trading in the sector, with 42% of businesses reducing opening hours per day and 34% reducing the amount of days they open per week,” the hospitality industry associations said.
Separately, the British Beer and Pub Association last month called for an urgent inquiry into “worrying reports of poor conduct from energy suppliers.”
“The spiralling cost of energy has been our members’ number one concern for close to a year now and remains so,” said Emma McClarkin, Chief Executive of the British Beer and Pub Association.
The Federation of Small Businesses (FSB) this month said that “soaring energy bills are fuelling the cost of doing business crisis.”
In response to the government’s new support scheme, FSB National Chair Martin McTague said, “Many small firms will not be able to survive on the pennies provided through the new version of the scheme.”
Some UK businesses face a 70-80% surge in energy bills, according to energy consultancy Cornwall Insight.
Robert Buckley, Cornwall Insight’s head of relationship development, told the Financial Times, “Companies were going to have to get used to a high energy price environment, but for some this could have a catastrophic, house of cards effect.”
By Tsvetana Paraskova for Oilprice.com
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