Firms Fear ‘Worst To Come’ – Energy Bill Support

Soaring energy prices have left households and businesses worried in recent months, with the government announcing an extension to support on offer for firms. But the new scheme for companies, charities, schools, and hospitals will be much less generous than the previous one.

It will see firms get a discount on wholesale prices, rather than costs being capped as under the current scheme, from April. They will only benefit when costs are high, prompting some business lobby groups to call for further assistance. So we asked businesses across the country how the new government plans will affect them.

Despite swerving some price rises through careful forward planning for her business, Sarah Curtis does not feel like the worst is over. Her boat keeping yard, which she has been running for 17 years in Ipswich, uses heavy machinery in its repair workshop. Those who store their boats on-site often use dehumidifiers and heaters too.

“I use a broker to find the cheapest electricity prices, and I only employ four full-time staff,” Sarah says. She has benefitted from reduced business rates as well as previously locking in energy prices for the firm until 2026. She says she feels lucky, “for now”, while some other businesses which only secured fixed-price deals last year might be stuck with higher costs. “[Further support] has to be paid back,” she points out. “At some point the government has to get realistic and no doubt business will share the brunt of that.” In its announcement, the government said it was scaling back energy subsidies for the next financial year to £5.5bn in a bid to reduce how much taxpayers are exposed to spiralling costs. But Sarah suggests: “It’s going to get worse for all of us before it gets better.”

Raoul Perfitt runs Herb UK, which produces haircare products in a factory in Lymington. He says he is pleased the new energy support scheme, which will run until the end of March next year, will give the firm “some certainty to help budget and plan”.

Wage bills, manufacturing, raw material and warehouse rental costs have all gone up for Herb UK in the last year. Plus the firm has seen shipping costs on 40ft containers increase from £4,000 to £10,000 – and Raoul says he is starting to feel squeezed. He says he has already seen huge resistance from retailers when he suggests he might need to pass on some of those higher costs. “Obviously we need time to assess exactly how much this [new plan] will reduce our bills by… But in the current extremely challenging economic conditions any assistance is very welcome,” he says.

“It’s not enough,” says Adrian Hanrahan, calling for further support for manufacturers. He is the managing director of Robinson Brothers, a chemicals producer based in West Bromwich. Under the new plans, high-intensive energy users, such as those in glass, steel and ceramics, will be eligible for higher discounts on their bills.

Although Make UK, the manufacturing trade body, said the announcement was a “welcome move”, Adrian does not believe his firm qualifies for the extra assistance. “Our energy bill went from £1.9m… to £3.4m last year,” he says, adding it is “set to get higher without the government help”. “It is detrimental for our size of business – we only have one pot of money and most of that is being used for day-to-day costs, redirecting our money from investing, to survival.” He also questioned how effective the new scheme would be for UK companies more broadly.

“At times we have to close pubs at certain parts of the day because it’s just not worth it, given the increases in energy costs we’re having to pay,” says Clive Watson, chairman of the City Pub Group. The group currently has more than 40 pubs located across England and Wales. But he says rising energy bills are holding it back from pursuing its expansion plans. “It’s great that energy prices are slowing down, but that’s just not coming through in the bills, just yet,” he says.

On Monday, the Treasury also confirmed that Chancellor Jeremy Hunt had written to the energy watchdog, Ofgem, to complain about firms that were not passing on discounts to customers. Despite that, Clive suggests that confidence will not return “until we see bills at the levels we saw them at last year”. Wholesale gas prices are now below the level they were before Russia’s invasion of Ukraine, but still three to four times higher than their long-term average. But Clive says that looking ahead to 2023, he remains “cautious”. “My long-term planning is on hold because of the short-term risks,” he adds.