Energy bill help for firms expected to be halved

Business groups are expecting government help with their energy bills to be halved after March, when the existing package of support expires.

Heavy energy users will get support close to current levels.

Chancellor Jeremy Hunt told business groups on Wednesday that the support would be at a "lower level" to protect the public finances from volatile energy markets.

Gas and electricity prices have been fixed for firms until the end of March.

The revised scheme is expected to run for 12 months until March 2024, with details on the level of support detailed next week

"No government can permanently shield businesses from this energy price shock," Mr Hunt added.

Businesses eligible for support include charities and local authorities.

Those at the meeting included the Confederation of British Industry (CBI), the Federation of Small Businesses, the British Chambers of Commerce, Institute of Directors, Make UK, UKHospitality, and the British Beer & Pub Association.

Unlike households, businesses are not covered in normal times by an energy price cap, which limits the amount suppliers can charge per unit of energy.

But after energy prices spiked last year, the government's Energy Bill Relief Scheme fixed costs, providing a lifeline for many firms that risked going bust without the support.

In October, the government said it would review the scheme due to its high cost to taxpayers, with officials considering options to extend support only for "vulnerable businesses".

A decision on whether to extend the support had been due before Christmas, but the government postponed it until the new year.

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

The delay is thought to have been down to the complexity of delivering the government's original ambition of separating out different sectors for different levels of support according to need.

It is impossible to accurately forecast how much the ongoing support, which ran from October, will cost the exchequer, as it depends on the difference between wholesale energy prices and the level of any cap.

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

The Treasury told businesses that extending the scheme at current levels "could cost tens of billions of pounds, with costs potentially doubling or tripling if international energy prices increase further than expected".

As wholesale gas prices have fallen sharply from the record highs seen a few months ago thanks in part to the very mild winter so far in Europe, the government may not need to spend as much as forecast.

Separately, household bills will also not rise as high as previously thought. Government subsidies are keeping typical annual household bills at £2500 till March when support will be scaled back.