Energy bills for businesses to be capped in £25bn intervention

It should mean bills for businesses are less than half the expected wholesale price from October 1.

Under the plan - which was announced this morning - all businesses and organisations will receive help for six months.

Liz Truss said the package would make sure firms could "get through the winter”.

However, while business leaders welcomed the package, they warned that without further help the relief would only delay the cliff edge to next Spring. 

The UK government scheme will see electricity prices capped at £211 per megawatt hour, while gas prices will be capped at £75 per mwh.

The relief will be applied to fixed contracts agreed on or after April 1 this year, as well as to deemed, variable and flexible tariffs and contracts.

Suppliers have been told to apply the reduction automatically to all eligible non-domestic customers with the government then compensating suppliers for the cost.

Earlier this month, shortly after her victory in the Tory leadership race, the Prime Minister unveiled the Energy Price Guarantee which should cap the energy bill for most households to £2,500. 

While there's been broad support for the plan, there's been fierce disagreement over how it is funded, after Ms Truss ruled out a windfall tax on energy firms, instead opting for eyewatering levels of borrowing. 

The government has yet to say how much these interventions will cost, but the IFS has predicted that the household scheme will need over £100bn from the Treasury, while consultancy Cornwall Insight has estimated that the new help for business could be as much as £25bn.

Last night, the finance ministers from Scotland, Wales and Northern Ireland wrote to new Chancellor Kwasi Kwarteng to say there were "deeply concerned at who will bear the brunt of these costs."

"Support should be funded by targeting the windfall gains in the energy sector rather than passing the cost to households through higher borrowing," they added.

Speaking from New York, where she's attending the UN General Assembly, the Prime Minister said: "We know that businesses are very concerned about the level of their energy bills.

“That’s why we are putting in place a scheme for business that will be equivalent to the scheme for households to make sure that businesses are able to get through the winter.

“We’re going to review it after six months. We’ll make sure that the most vulnerable businesses like pubs, like shops, continue to be supported after that.”

Shevaun Haviland, Director General of the British Chamber of Commerce, said the help would get many businesses through a difficult period. 

He added: “For those that will benefit, six months support is not enough to make plans for the future.

“We understand there are a range of unknowns for the government in looking ahead, but without further reassurance very few firms will make plans to invest or grow.   

“Some businesses will still struggle to meet their bills despite this government intervention, the Chancellor must prioritise those firms in his mini-budget on Friday. " 

Stuart Patrick, Chief Executive of Glasgow Chamber of Commerce, said the announcement was welcome but said there were still a number of other difficulties facing companies.

“The recovery from the impact of the pandemic is still very fragile and whilst this is a welcome development it remains only one of a number of costs rises which businesses are having to navigate.

“Staff shortages, inflation and supply chain issues are all massive barriers which businesses are facing so whilst we are encouraged that Government are taking this action to address the energy costs, we still require further movement to address the overall cost of operating to help businesses thrive.”

Scottish Conservative Shadow Cabinet Secretary for Finance and Economy, Liz Smith welcomed the support.

She said: “Many businesses barely survived the pandemic, and it was clear that a furlough-level intervention was needed to protect them from the potentially fatal blow of the global energy crisis.

“This generous package delivers that – protecting businesses of all sizes from punishing and unaffordable bills and saving countless jobs and livelihoods across Scotland. This is on top of the energy price cap guarantee for households, which will save families thousands of pounds on their home energy costs.

“Russia’s appalling invasion of Ukraine has meant that we all face a harsh winter. However, the UK Government’s exceptional support for businesses and families will cushion Scotland from the worst of the global cost-of-living crisis and help people right across the country.”

Labour said the plans had come too late for some firms.

Shadow business secretary Jonathan Reynolds said: “It is farcical that the Tories have been unable to tell businesses at the sharp end of the energy crisis what they plan to do to help them until now. Labour has been calling for support since the start of the year.

“Businesses have been crying out for detail on these plans and, even now, there are still questions about how much this will cost and who will pay for it.

“We have known a crisis of this scale has been coming for months and Conservative dither and delay has forced too many businesses to close, with the future still looking bleak.

“While the Tories prioritise the profits of oil and gas producers, Labour will always be on the side of business and the jobs they create.”

The Liberal Democrats described the scheme as a “temporary sticking plaster.”

The party's treasury spokesperson Sarah Olney said: “This temporary sticking plaster comes too late for the many small businesses that already closed their doors for the last time because they couldn’t afford soaring bills.

“The Conservatives have sat on their hands for months while treasured pubs, cafes and high street shops went to the wall.

“This delayed announcement will leave our small businesses, schools and hospitals under a cloud of damaging uncertainty. The government have no plan beyond these next six months, paralysing businesses who need to make decisions for the long term."

Deputy First Minister John Swinney called on the UK government to go further. He said: “Energy policy is reserved to the UK Government and we have been calling for it to introduce a business energy cap for some time.

“I welcome that it has now done so, but without substantial reform to the energy market there is a real risk that this temporary measure will prove to be inadequate.

“Given the increased cost of borrowing this support must be funded, in part, by targeting windfall gains in the energy sector.”

He called for changes to the current approach on electricity transmission charging, adding: “The UK Government also needs to match the more generous levels of support provided by EU countries such as Germany.

“The powers and resources needed to tackle the cost of living emergency on the scale required: access to borrowing, welfare, VAT on fuel, taxation of windfall profits, regulation of the energy market; lie with the UK Government and we have continually urged it to use all the powers at its disposal.

“We will continue to do everything within our resources and powers to help those most affected.”