Trade organisations in Wales have expressed their disappointment at the reduced energy bill support scheme for businesses, announced by the Treasury earlier this week.
On Monday evening, the UK Government announced financial aid would be extended for another 12 months from the start of April this year to the end of March 2024 - but the amount available to business owners will be much less.
Ministers said that non-domestic customers – which include businesses, charities and schools, among others – would get up to £6.97 taken off their energy bills for every megawatt hour (MWh) of gas they use. Electricity bills will also be discounted by up to £19.61 per MWh.
Read more: The 23 companies in Wales to watch in 2023
The discount will only apply when gas prices are more than £107 per MWh for gas and £302 per MWh for electricity. If bills are lower, then businesses will not get any support.
The new scheme is expected to cost around £5.5 billion over the whole year. This is considerably less than the £18 billion that is expected to have been paid out in the six months that the old scheme lasted.
The UK Government said that under the old scheme a pub that uses 16 MWh of gas and 4 MWh of electricity each month could have been given around £3,100 per month in support. But under the new scheme the same pub will get £190 per month.
Responding to the announcement, Ben Cottam, head of the Federation of Small Businesses (FSB) in Wales said the UK Government’s decision to reduce support was “bitterly disappointing”.
“Small businesses in Wales have been kept in the dark for far too long and now, at the final hour, they have effectively left them to the mercy of sky-high costs and a badly functioning market,” said Mr Cottam.
“Having warned that one in four businesses will be considering closing, selling, or restructuring without a replacement scheme with sufficient support, some of those Welsh businesses will now inevitably be pushed into making some of those difficult decisions about their future.”
He added: “Over recent days, the government had been managing expectations that support would be lessened, but we never would have anticipated it being reduced to this extent. This is a devastating blow for small businesses in Wales and across the UK, which the government will need to re-think.”
Energy and trade-intensive industries, such as factories that burn a lot of gas, will get extra support, said ministers. Those businesses that are eligible will get a maximum discount of £40 per MWh of gas and £89.10 per MWh of electricity. It will apply to 70% of their energy use by volume.
Paul Slevin, executive chair of Chambers Wales said that, while any support is appreciated and welcomed, the new package is “undoubtedly a downgrade in support for businesses”.
“The level of support outlined will not be enough to ensure businesses’ survival over the next year and falls below expectations for the private sector,” said Mr Slevin.
He added: “A recent British Chambers of Commerce (BCC) poll found that 47% of businesses nationally would struggle to pay their energy bills if the scheme was not extended, with 4% stating they would not be able to afford the bills at all. With this announcement, many businesses will face this reality owing to a smaller funding envelope from Westminster.
“Firms existing on the edge of energy affordability already will struggle come April. There are further questions around the energy intensive industries’ support and their thresholds as this will affect Wales’ larger manufacturers.Businesses need greater levels of support over energy to help the economy recover but they cannot do it alone.
“This year will be critical for the Welsh and British economy going forward. It is key that businesses obtain the right support to assist economic recovery or face the same issues in 12 months’ time.”
The original energy support package for businesses was always seen as a short term measure when it was first announced in September by the then prime minister Liz Truss.
Chancellor Jeremy Hunt said: “Wholesale energy prices are falling and have now gone back to levels just before Putin’s invasion of Ukraine. But to provide reassurance against the risk of prices rising again we are launching the new energy bills discount scheme, giving businesses the certainty they need to plan ahead.
“Even though prices are falling, I am concerned this is not being passed on to businesses, so I’ve written to Ofgem asking for an update on whether further action is needed to make sure the market is working for businesses.”
Read more:
