Reduced energy support will cost businesses a further £4.5bn

12 January, 2023

According to the UKHospitality, the lower level of energy support announced by the government will cost the hospitality sector an additional £4.5 billion.

Companies will receive a discount on wholesale prices under the new scheme, which will run from 1 April 2023 to 31 March 2024, rather than having their costs capped.

Eligible non-domestic customers who hold a contract with a licensed energy provider will get a unit discount of up to £6.97/MWh directly applied to their gas bill and a unit discount of up to £19.61/MWh automatically applied to their electricity bill.

Heavy energy users such as manufacturers will receive a larger discount than others. However, firms that pay less than a certain price for wholesale energy will not receive any support.

As stated by the government, this measure will help businesses to control their energy costs, locking into contracts signed prior to recent significant drops in wholesale prices, as well as reassuring others against the risk of prices increasing again.

Kate Nicholls, UKHospitality Chief Executive, said:

"While I’m relieved the chancellor has listened to UKHospitality’s concerns and extended the scheme as a whole, the absence of a sector-specific package that helps vulnerable sectors like hospitality will still result in higher bills.

Our analysis shows the new, lower level of support will see a total £4.5bn hike in bills for the sector compared to the previous scheme. This will simply be unsustainable for many.

With no further, dedicated support for a vulnerable sector like hospitality, I’d urge the government to consider other measures it can take to help the sector.

Now we have some clarity on the future of energy support, we must see a concerted change in behaviour by energy suppliers, who have been unfairly treating businesses with outlandish quotes and unjustifiable demands for enormous deposits or pre-payments.

Government must act swiftly if this is not forthcoming. This scheme is a significant investment from the government and energy suppliers should not be using that as an excuse to hike up prices.

The Ofgem review into the non-domestic market should serve as a wake-up call to suppliers that now is the time to be reasonable with the quotes they’re offering and to abandon unfair demands of businesses to secure fixed deals. They should also consider allowing businesses to renegotiate if they are stuck on previously agreed, inflated fixed deals."

Michael Kill, Executive of the Night Time Industries Association, added:

"The announcement once again outlines how out of touch the government are with businesses. Even under the current relief scheme, greedy, profiteering energy companies are subjecting businesses to over 400% increase on previous energy bills.

All of this in light of the fact that gas/oil wholesale prices in recent months have dropped below the levels prior to Russia’s invasion of Ukraine.

The scaling back of the energy relief scheme by government at the end of April, will without doubt mean thousands of businesses and jobs will be lost in the coming months."

Clive Watson, Chairman of the City Pub Group, commented:

"At times, we have to close pubs at certain parts of the day because it’s just not worth it, given the increases in energy costs we’re having to pay. It’s great that energy prices are slowing down, but that’s just not coming through in the bills just yet. My long-term planning is on hold because of the short-term risks.”

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