The support that the government is giving the domestic market to help with the energy crisis has been well reported in the news, but the aid for businesses has not been discussed to the same level. To help, we’ve summarised what the support for businesses is and what a business can do if it’s struggling financially.
The current rate of inflation in the UK is running at about 10%, the highest it’s been since way back in the 1980s. The reasons for this are quite complex, but broadly can be attributed to Brexit, problems with the supply chain, and latterly the war in Ukraine. The biggest rises (after fuel, which is now thankfully dropping back down) are the gas and electricity prices which show no signs of reducing, at least in the near future (some pundits have estimated that prices for energy won’t start to fall until at least the tail end of 2023).
As we know, a support package for households was announced recently, and the government have implemented an energy price guarantee, meaning that the average household should pay no more than £2,500 per year.
Businesses, until now, were not so lucky, and had to try to absorb the rising gas and electricity prices themselves.
The official government insolvency statistics for the second quarter of 2022 show that there were over 5,500 corporate insolvencies for the period, an increase of over 80% compared with the same quarter in 2021. Admittedly, part of the increase is as a result of the restrictions imposed by the government on presenting winding up petitions, but it’s also highly likely that part of this increase is down to rising energy prices and interest rate hikes. The recent rate rise of 0.5% will certainly not help.
As announced on the 21st September, the Energy Bill Relief Scheme (EBRS) sets out how the government will be helping businesses through what could be a difficult Winter, aiming to support businesses along the same lines as households going forward.
The Energy Bill Relief Scheme will essentially offer a discount on wholesale electricity and gas prices for all non-domestic customers. This will include schools, hospitals and the voluntary sector, and all other UK businesses.
However, the level of discount will depend on what the existing energy contract states. It is not a blanket discount irrespective of circumstances.
Initially the discount will only apply for a period of six months, and will apply to:
- Contracts that are fixed and have been agreed after 1st April 2022
- Deemed variable and flexible tariffs and contracts
- The period covered will be the energy use from 1st October 2022 to 31st March 2023
The discount will be applied automatically. There is no need for businesses to apply for them.
After three months (Jan 2023), the government has stated that it will issue a report detailing which sectors are more vulnerable, and it will outline what (if any) continuing support will be given after the initial six month period.
Precisely how the government is going to fund this scheme is unclear at present, but broadly the tariffs that businesses can expect to be paying will be as follows:
Current expected costs:
- 60p/kWh (electricity)
- 18p/kWh (gas)
Under the new scheme:
- 1p/kWh (electricity)
- 5p/kWh (gas)
It should be noted that the wholesale price doesn’t represent the whole of the energy bill, and many businesses will still be paying daily rates for supply. That means the discounts won’t apply to the entire bill.
If your business is currently out of contract, the government advice is to set up a contract now, and this will ensure that the relevant price reduction will be automatically applied to your bill by your supplier.
If your business signed a contract before 1 April 2022, then you won’t be eligible for the support scheme, because your business won’t have been exposed to the recent rise in wholesale prices.
If your bills are crippling your business, or you’re facing any other financial difficulty, please make sure you get advice early. The sooner you seek advice from a professional, the more time and scope there is to deal with it and the more options you’ll have. Closing down a business is always the worst case scenario, and often there are other ways to save a business, even if you can’t see what that is at present.
Our friendly team is always on hand to advise anyone. Please don’t ever hesitate to get in touch.
Contact the BLB Advisory team on email@example.com or 02475 097627 to speak to our head office.