Bringing the latest news and analysis from the credit risk industry

Government Energy Bills Support Scheme For Businesses Cut

• 09/02/2023
• Paul Atkinson

Government to cut Energy Bill Support for small businesses.

From April this year, the UK Treasury intends to discontinue its financial assistance for small and medium-sized enterprises concerning their energy bills and expenses. Working with suppliers will reduce wholesale energy costs - and the significant increases in bills that businesses have seen.

The government had initially put aside £18 billion to shield firms from energy price increases between October and March of last year. Still, it said they would cap support at £5.5 billion for businesses over 12 months from 1 April 2023.

Despite the government creating an Energy Bill Relief Scheme (EBRS) in advance of the winter months, energy bills rose considerably in 2022, forcing many firms into insolvency.

This initiative cut energy prices for all non-domestic users across the country, although it was only supposed to last until the end of March 2023.

Following consultations with industry leaders in recent weeks, chancellor Jeremy Hunt intends to cut the amount of public money necessary to help firms and charitable organisations meet their energy bills.

Mr. Hunt has argued that keeping the relief plan as it was beyond April would be "unsustainably expensive" and that "no government can indefinitely protect firms from the energy price shock."

Energy Bill Discount Scheme summary

For eligible non-domestic customers who have a contract with a licensed energy supplier, the government has unveiled the following support:

• From 1 April 2023 to 31 March 2024, all eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill.
• This will be subject to a wholesale price threshold, set with reference to the support provided for domestic consumers, of £107/MWh for gas and £302/MWh for electricity. Businesses experiencing energy costs below this level will not receive support.
• Customers do not need to apply for their discount. As with the current scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.

For eligible Energy and Trade Intensive Industries, the government is announcing:

• These businesses will receive a discount reflecting the difference between a price threshold and the relevant wholesale price.
• The price threshold for the scheme will be £99/MWh for gas and £185/MWh for electricity.
• This discount will only apply to 70% of energy volumes and will be subject to a ‘maximum discount’ of £40.0/MWh for gas and £89.1/MWh for electricity.

The Federation of Small Businesses (FSB) has warned the chancellor that suddenly eliminating help for enterprises concerning their energy costs will result in "a raft of business closures."

Small businesses dipping into life savings to stay afloat amid rising costs.

Businesses are depleting their financial reserves to stay afloat.

Rising prices, decreased revenues, and increased pay bills prompted small and medium-sized enterprises to use their funds by the end of 2022.

According to the findings of an Investec poll, 43% of organisations plan to deplete their reserves in the next six months, with 4% expecting their savings to be wiped out.

Furthermore, increased interest rates will make it more expensive for firms to get loans in the next year. According to Investec, fewer borrowing alternatives will force some firms into administration.

The Energy Bill Relief Scheme is expected to cease in March, and no announcements for any alternative assistance have been offered. Business organisations have warned that businesses' energy expenses might double if the plan expires.

According to Investec, a tiny percentage of CEOs were able to increase their savings at the end of last year due to more substantial growth. However, a quarter claimed they could improve their savings because they reduced employment or couldn't find the right people to fill available positions.

Investec believes that SMEs have an average of £117,000 in savings accounts, albeit this varies greatly amongst businesses. A quarter of companies, notably those in high-growth IT industries, indicated they were utilising savings to "invest in the expansion of their business."

According to the Office for Budget Responsibility (OBR), corporate investment is anticipated to slow in the forthcoming years as increased energy costs and economic uncertainties stifle growth.

"SMEs are inevitably feeling the economic strain from rising prices and increases in their energy bills as well as issues with recruiting staff and funding pay rises for their existing workforce," said Samantha Booysen of Investec."

How CoCredo can help you protect your business through this challenging period

Dan Hancocks, CoCredo’s MD says: “You can protect your business from risk by monitoring your existing clients and suppliers safe in the knowledge that the companies you do business with are secure and dependable. It is critical to continuously monitor any changes that occur since they give significant insights into a company's financial performance, allowing you to respond fast, if necessary, to protect your firm. We offer a company monitoring service to UK and International businesses so that you can keep an eye on companies relevant to your business anytime across the globe." Why not request a free trial company credit check when you call us at 01494 790 600? 

• Previous article
• Next article