Business West responds to the Government’s new energy support package

Yesterday’s (9 January) delayed Government announcement of longer-term support for business is welcome especially as firms can now see how this scheme is intended to operate through to April 2024. 

However, the size of the package has been curtailed by over 75% and has been designed so the vast majority of the support has been targeted to heavy industrial energy using sectors. This  leaves a worryingly small amount for the rest of the business community on which regional economies depend.

The scheme acts as a (6.5%) discount on energy bills once a threshold price is achieved:

-electricity - £19.61 per megawatt hour (MWh) with a price threshold of £302 per MWh.

-gas - £6.97 per MWh with a price threshold of £107 per MWh.

The scheme is designed to switch off when wholesale prices are below record highs seen in 2022 – when prices are below the threshold the scheme provides no discount, even though businesses are under extreme pressure from inflationary factors with declining margins and confidence. 

The Government has radically reduced the scheme’s total allocated cost (£5.5bn over 12 months, as compared to over £18bn for the 6 months of the 2022/23 winter), so there is a real risk that the resources are insufficient for the needs of businesses. The threshold for the support seems far too high given the pressure many firms face. 

If prices do trigger the scheme to operate the funds will be spent very quickly and it’s not clear whether the scheme will be topped up with additional resources by HM Treasury, or whether the scheme might be forced to close earlier than scheduled.

Energy and Trade Intensive Industries sub scheme

Higher level support and a lower threshold is available for firms operating within particular sectors (termed the ‘Energy and Trade Intensive Industries’ ETII) – selected by their energy and goods trade intensity based on ONS data. For these businesses specifically the higher discount and lower threshold values are:

-electricity - £89 per MWh with a price threshold of £185 per MWh

-gas - £40 per MWh with a price threshold of £99 per MWh

The list of SIC codes that HM Treasury plan to use for this enhanced scheme can be found here. If businesses feel that they are likely to have been overlooked for inclusion within this list please contact Claire Ralph, Policy Manager, as we will be feeding in discrepancies via the British Chambers of Commerce network for businesses in our region.

Whilst detail of this scheme, and the fact it will be in place until April 2024 provides much needed certainty for businesses in our region, which Business West considers is welcome, the scale of the intervention seems inadequate for the needs of business at this time. The design of the scheme prioritises some groups for the limited funds available, meaning that the remainder is extremely thin. We worry about the consequences of energy prices as a further drag on business profitability throughout 2023 for otherwise viable and sustainable firms in the South West.