David Equi can’t seem to catch a break. He opened a gleaming new factory in Glasgow for his eponymous luxury ice-cream business on the eve of the coronavirus pandemic, and has now missed out on the cutoff for government energy support by a single day.
Faced with a sharp rise in energy costs, he plans to shut down his blast freezer – a container that rapidly cools 40 pallets of ice-cream – this winter. “We’re turning that off and using our existing freezers just to save money, and will switch it back on in the summer. We’re just looking at the tiniest wee things where we can save.”
Equi is also considering closing the factory entirely for up to three weeks over Christmas to save on bills, rather than operating on a skeleton staff as usual at the business, which supplies customers from Aldi to the Gleneagles hotel.
Many businesses will have invested in long-term sustainability measures to become more energy efficient but now, faced with rising prices, firms of all sizes across the country are examining every available measure to cut their bills.
The electrical retailer Currys plans to turn down the brightness of its TVs; Vivendi, the owner of the Havas advertising agency, is turning down the temperature in its offices by 1C; and 300,000 LED lights will illuminate Oxford Street this Christmas – cheaper and more efficient than standard lightbulbs.
The incentive is clear: the restaurant and pub group Mitchells & Butlers said at the end of last month that its energy bill had almost doubled to £150m on pre-pandemic costs. Alston Wholefoods, a village shop in Cumbria, has switched off its freezer and is instead using laminated pictures of products for customers to order, saving an estimated £3,000 on its annual bill.
Some small businesses fear they will be asked by the government to shut down this winter to conserve energy supplies. Others say the sudden increase in costs has left them fighting for survival.
Bev Lee runs a bistro in Aberdeen offering afternoon teas and corporate catering. Faced with a doubling of her energy bill to almost £3,000, she has taken action. There’s the new double-glazed front door, pressure cooker, infrared heaters and air fryer for energy efficiency; she has consolidated her storage space so the fridge door isn’t regularly opened and switched off the fairy lights that passersby used to remark upon.
Lee takes a meter reading each morning and evening. She is even commuting more slowly, driving at a top speed of 50mph to limit fuel costs. Crucially, she is closed for walk-in customers, only opening for bookings, to rein in energy costs. “I’m just determined to have all the ingredients in place to get myself through this winter. When it’s your business, you do what it takes to survive.”
In late September the government announced the energy bill relief scheme, a six-month support measure for businesses, charities and public sector organisations. It could cost up to £48bn.
Officials set a standard discount – expected to be £211 a megawatt hour (MWh) for electricity and £75/MWh for gas – for non-domestic customers on fixed contracts, which the government said would be “equivalent” to the support given to households.
The support will be applied to bills from 1 October retrospectively as it is still in launch mode. Businesses had to have signed their latest energy deal after 1 April – or ink contracts before next April – to become eligible. Critics have argued that gas prices began to rapidly rise last autumn, and increased after Russia’s invasion of Ukraine in late February, making April a baffling starting point.
Equi signed a new contract on 31 March, although it did not begin until May. “It’s incredibly frustrating because it’s just an arbitrary date,” he says. His case was taken up by Margaret Ferrier MP, who asked the chancellor, Kwasi Kwarteng, to review the cutoff date for support in the Commons just after his mini-budget and hours before he attended a champagne party with financiers.
He is far from alone. Lee signed an 18-month fixed contract in February, missing the support cutoff by only a few weeks. “It hurts to know that I’m not getting any government support … [but] in a realistic world, any support the government gives us we eventually have to pay it back in higher taxes,” she says.
There is also confusion and frustration among businesses over exactly how much the support will reduce their bills. Truss’s administration has talked about a halving of energy bills for businesses but analysis by the leading consultancy Cornwall Insight shows it expects the discount to be between 25% and 40%, depending on their contract.
The difference between this support scheme and the one for households is that a cluster of fixed costs will remain for business customers: these include suppliers’ metering and network charges and the cost of credit reflecting the commercial risk of customers not paying.
For those on variable tariffs, a maximum discount will be applied. On 21 September, the government said this was “likely to be about £405 per MWh for electricity and £115 per MWh for gas”. However, guidance released earlier this month shows the maximum discount has now been reduced to £345/MWh for electricity and £91/MWh for gas, potentially adding to the confusion. “This is such a complex plan; there have been so many questions from suppliers,” says a source close to discussions between the government and industry.
“Some suppliers have said they will be able to implement it quickly, others say they don’t have the granular data on their customers to calculate the discounts but government has said there cannot be different rules for different suppliers,” he adds. “Suppliers are also reluctant to pass on the discount until there is legislation, so there’s confusion over when the scheme will actually begin. Clearly the support is welcome but it is not as generous as the household package and may not have a massive impact.”
