Government's Energy Relief Scheme: Industry response
Today (September 21), the Government announced that provide energy bill relief for non-domestic customers in Great Britain. Discounts will be applied to energy usage initially between 1 October 2022 and 31 March 2023.
Karen Betts, chief executive of the Food and Drink Federation welcomed the scope of the Energy Relief Scheme and the speed with which it’s being rolled out.
“It addresses the largest and most volatile cost pressure facing our industry right now,” said Betts. “Although some aspects of the scheme are still to be clarified, it offers relief to food and drink manufacturers across the UK.”
Lifeline for the industry
British Beer and Pub Association chief executive Emma McClarkin described the package of support as a lifeline for brewers this winter, but urged for the scheme to be easily understandable so that businesses know what discount they will be receiving and plan ahead.
She also called for the requirement of a security deposit to enter new contract to be removed as a barrier to fair supply.
“Whilst this announcement has helped businesses to breathe an initial sigh of relief as they head into this critical period, more support is needed to tackle the cost of doing business and we need a plan beyond the next six months,” McClarkin continued.
“Our industry is one of only a few that supports jobs and livelihoods in every single part of the UK, and we have the potential to deliver growth in every single community we serve. On Friday, the Chancellor must take steps to address the cost of doing business, by reducing the tax burden on our sector, allowing pubs and brewers the chance to not only survive this winter, but remain at the heart of local economies and their communities for many years to come.”
Energy Relief Scheme
The government will provide a discount on your gas and electricity unit prices. To calculate your discount, the estimated wholesale portion of the unit price you would be paying this winter will be compared to a baseline ‘government supported price’ which is lower than currently expected wholesale prices this winter.
For all non-domestic energy users in Great Britain this government supported price has been set at:
£211 per megawatt hour (MWh) for electricity
£75 per MWh for gas
A comparable rate will be set shortly for Northern Ireland.
For comparison, wholesale costs in England, Scotland and Wales for this winter are currently expected to be around:
£600 per MWh for electricity
£180 per MWh for gas
Is it enough?
Walid Koudmani – chief market analyst at financial brokerage XTB – also queried whether the plans were enough to help British businesses through the winter, as well as the wider impact it might have on the economy.
“How much will it cost and what is the impact on UK borrowing? Remember this comes on top of the announced £150bn package for households in the next two years,” said Koudmani.
“With the treasury refusing to publicise the latest OBR forecasts in this week's mini budget, it's no wonder that investors are selling the pound yet again this morning. Secondly, is six months really enough? I can foresee that being extended but nevertheless, this is a good first step.”
Association of Independent Meat Suppliers spokesman Tony Goodger welcomed the new scheme, but was concerned about how little information there was about the Government’s plans after the six month period.
Planning for the future
“The support package will help to calm the nerves of some businesses,” Goodger explained. “However, as today’s announcement is for just six months and our member’s businesses as well as the businesses they supply are energy intensive users and it is essential for their business planning that the Government provides further details as to what will happen to energy bills from 1st April 2023 as soon as they are able to.
“The Government is wanting to see the economy grow quickly and our members cannot be left in a position whereby announcements of support are left until the 11th hour if they too are to plan for growth.”
Provision Trade Federation (PTF) director general Rod Addy said the projected energy costs would provide suppliers and customers alike with much needed relief. He also welcomed the news that this automatic relief would be applied to contracts fixed since 1 April this year for as long as the contract was agreed.
“However, we still await more details about how the Energy Bill Relief Scheme will apply to individual businesses,” he continued. “The energy crisis will not cease any time soon, especially given Putin’s declared intentions to escalate Russia’s conflict with Ukraine.
“We would therefore press Government to continue this support beyond six months to offer longer-term certainty to enable them to plan ahead more effectively, as well as looking to it to develop sustainable long-term energy security for UK industry. Government also needs to recognise the special and vital role of food manufacturing in considering support beyond the initial period.”
Rupert Ashby, chief executive of the British Frozen Food Federation said the support couldn't come a moment too soon.
"Even with this financial package, many BFFF members will be facing substantial price increases on their energy bills at a time when they are facing many other cost pressures as well," he added.
"What’s really important is that over the next six months ministers develop more targeted support that will give frozen food companies certainty about the long-term outlook. We will be actively engaging ministers and officials and asking them to engage directly with the industry to ensure they understand the pressure our members are under.”
