Businesses left in dark over UK’s energy rescue package

British businesses have warned that time is running out for the government to provide details of its plans to subsidise energy supply, with questions over the scope and pricing of the support as well as the threat of a six-month cliff edge.

Business groups on Thursday 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.

Craig Beaumont, chief of external affairs at the Federation of Small Businesses, raised concerns about the lack of detail from the government with only weeks to go before many businesses faced financial ruin.

He 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.”

Prime minister Liz Truss said businesses, charities and public sector organisations would be offered six months of support “equivalent” to the package being offered to consumers.

But 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 companies that have already agreed contracts at higher levels in recent months.

This support for businesses will expire after six months, when a review will decide on further help, which will be targeted at only the most vulnerable industries. There was on Thursday, however, no further detail about which industries were likely to be deemed vulnerable.

Many shops, pubs, restaurants and hotels have warned that they will not survive the sharp rise in energy prices this winter, but may be seen to need less help in the spring. Larger companies in energy-intensive industries, such as chemicals, may also not be judged vulnerable.

Steve Elliott, chief executive of the Chemical Industries Association, cautiously welcomed the proposals, saying they would “potentially see us through winter”. But he argued that much of the detail was still lacking.

“We have members who are facing the looming October 1 renewal date [of their energy contract]. Many were holding off agreeing a new deal pending the government’s relief package. They could now be at the mercy of the day ahead market,” said Elliott.

Gareth Stace, director-general of UK Steel, said it was “vital” the government engaged with the sector to provide “certainty on what further support will be provided to the most energy intensive industries beyond this six-month guarantee”.

The FSB also asked whether new quotes would need to be for six months at the low rate, given standard contracts last a year.

Emma Corfield-Walters, founder of Book-ish, an independent bookshop in Powys, Wales, said that the shop had fixed a new rate two months ago at a “hugely” higher level, in view of skyrocketing prices at the time.

To pay its electricity bill last month, the shop would have needed to sell 211 paperbacks at £8.99 each.

“I’m very confused as I’m sure many small businesses will be. If you have a fixed rate contract and the unit price is higher than the capped price, will it still be reduced for six months or does the contract mean it’s fixed?,” said Corfield-Walters.

One in five businesses that responded to a survey of pubs, restaurants and hotels by lobby group UKHospitality, which was published on Thursday, said they would not survive the current crisis. Meanwhile, 60 per cent admitted they were no longer profitable.

Kate Nicholls, chief executive of the lobby group, welcomed recognition of the need for support but added: “The devil is in the detail: we need to see who can benefit from this and exactly what sort of financial package is being proposed for them.”

UKHospitality found that average energy prices for the hospitality sector had increased 238 per cent, with more than 70 per cent of businesses’ bills more than doubling. That took average energy costs as a percentage of turnover from 5 per cent in 2019 to 18 per cent.

Nicholls said an energy price freeze was not enough for the hundreds of businesses already struggling to pay for their electricity and heating in winter. She urged Truss to provide more immediate help with cash flows by reducing VAT and business rates.

Matthew Sims, chief executive of Croydon’s Business Improvement District, said more than 150,000 businesses had been “making difficult decisions on the promise that support . . . would be coming today”.

“This hasn’t happened, and swaths of businesses from now will be left with no option but to close, triggering mass unemployment, which will only exacerbate the overall cost of living and energy crisis we are experiencing,” he added.

Muniya Barua, managing director of policy at BusinessLDN, the London lobby group, said businesses “have only been given a six-month reprieve, with no clarity on what support is being provided”.