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Monday, September 12, 2022

Business energy plan what it means for you


By Timothy Adler on Small Business UK - Advice and Ideas for UK Small Businesses and SMEs

Chancellor Kwasi Kwarteng looking pensive

Liz Truss has set out her energy plan for business, offering equivalent help as households on bills – but only for six months.

Under this, the state will pay energy suppliers the difference between the new cap and what energy retailers would otherwise charge their customers.

After six months, the government will switch from the business scheme to a more focused plan for vulnerable industries, such as hospitality.

>See also: Firms may be offered grants to pay for energy

However, five days on from the announcement, there have been no further details on how Liz Truss intends to implement her small business energy plan.

Unlike the household support, the government has not provided any financial details about where fixed unit prices would be set or if it could be used by small businesses that have already agreed contracts at higher levels in recent months.

Business groups have called for the package to be worked out as quickly as possible, with many companies due to renegotiate their electricity and gas rates in October.

Questions still to be answered include:

  • What will be the fixed unit prices (and standing charges) from October 1?
  • What practically will now change – will energy retailers suspend high quotes and contract offers and recalculate from October 1?
  • Will those who have accepted hugely increased bills in recent weeks be able to renegotiate to bring their bills down to reasonable levels?
  • As a small business normally gets quoted for at least 12 months, does that new quote include 6 months at a low rate and 6 months at a high uncapped rate? How does the energy retailer know who to quote extra support to, for the second six-month period?

Craig Beaumont, chief of external affairs at the Federation of Small Businesses, said: “Done right, this will be a lifeline to small businesses. However, there is a worrying lack of detail and lots of questions about practicalities, while the six-month cliff edge does not match the two years of consumer support.”

>See also: FSB calls on Liz Truss to help small businesses

Kwasi Kwarteng, the new chancellor, will review where support should be targeted once the six months have expired in the coming weeks.

Energy bosses say they need details of the promised business energy support within days for it to take effect this winter. They worry that the death of Queen Elizabeth and a week of national mourning may suck up valuable time that could be used for working out details of the business energy plan. The sector needs time to process the details if businesses are to benefit this winter.

Unlike households, which generally pay in line with the price cap and use a small number of suppliers, businesses individually negotiate energy contracts at different rates with multiple suppliers. New support needs to cut through the tangle of individual deals.

“We are talking in days — we have to come up with a solution,” one source at an energy supplier told the Daily Telegraph.

How the business energy plan will work

What is known is that household energy bills will be frozen at £2,500 per year from October 1 until the next election.

The Liz Truss energy package is expected to cost £150bn over the next two years — £60bn of which will be carved out for business support.

The business energy plan was announced just as insolvency experts warned that 50,000 businesses were at risk of closing without government support due to the soaring cost of energy.

And hospitality bosses warned that one in five businesses in the sector would not survive the current crisis and that hundreds of thousands of people would lose their jobs unless government support is received.

Small business reaction

However, small business owners who contacted Small Business were underwhelmed by the Liz Truss energy plan, as the lack of detail still leaves many small businesses in the lurch, making any forecasting business plans impossible.

Steve Malkin, CEO of sustainability group Planet Mark, said: “This package of measures doesn’t go nearly far enough. Giving businesses just six months of cover is merely a stopgap, while freezing bills at rates which are still too high for many to afford – especially Britain’s 6m small and medium-sized firms (SMEs) – is another sticking plaster solution.”

Roan Lavery, CEO and co-founder of accountancy software firm Freeagent, was similarly dismissive: “Limiting the energy price cap for businesses to just six months – rather than the two years that it will apply for households – is completely the wrong message to be sending at this time. It suggests that business owners will only be supported in the short term and will just face the same issues again in the new year once the cap is lifted.

“And although the government says further support will be targeted at ‘vulnerable industries’ … the reality is that the overwhelming majority of small businesses are vulnerable, whether it’s freelancers, contractors, small agencies, shops, hospitality venues or the myriad other small ventures across the country.”

Sara Hall, founder of The Silk Purse Guild, added: “This help from the Government could not come soon enough. This energy bill crisis is piercing the very heart of UK small businesses. There is a tangible, underlying fear running through the UK’s small business community.”

More on business energy crisis

Just one supplier has fixed business energy deal from October

The post Business energy plan what it means for you appeared first on Small Business UK.


Timothy Adler, Khareem Sudlow