Businesses facing rising energy bills finally have clarity on the level of government support they will receive once the current arrangements expire at the end of March – and as expected, the package which will apply from 1st April is considerably less generous than the one it replaces.
This shouldn’t surprise us; in the current fiscal climate, the continued pumping of vast amounts of taxpayer cash into the business energy support scheme would be unsustainable.
Despite calls for special protection of vulnerable sectors such as hospitality, the new Energy Bills Discount Scheme is by-and-large a ‘one size fits all’ arrangement, with every business receiving the same level of discount on their bills once the wholesale price reaches a certain level (this is in recognition that energy prices have come down and may continue to do so into the spring at least).
The only exception is for energy-intensive users such as steel and glass manufacturers, but other than that, small and large businesses will be treated the same. Organisations representing SMEs have understandably complained about this, but in reality it would have been difficult and over-bureaucratic to distinguish between different types of users, particularly as energy providers simply don’t have that kind of data.
Falling energy prices will save the Treasury around £13 billion in energy subsidies and debt repayments this financial year, compared with initial estimates, but there are plenty of worthy demands on this ‘fiscal headroom’.
For small businesses in the hospitality sector, the average discount will be £2,300 a year. That is not a lot given that many such businesses have signed up for energy contracts which have seen their costs increase many times over. As my colleague James Shipp, who heads up Lovewell Blake’s specialist Hospitality and Leisure team points out, there may well be a need for some targeted help for this sector.
“Wholesale prices have indeed fallen, and that will benefit many businesses in the hospitality sector, but the new discount scheme doesn’t go anywhere near meeting the increased costs that pubs, restaurants and cafes are facing despite this fall,” says James.
“There is no guarantee that energy prices won’t head back up later in the year, and businesses which are likely to be affected shouldn’t assume that the government will step back in and offer further support. We have seen measures such as business rates discounts and a reduction in the rate of VAT for hospitality used during the pandemic – but there is no indication currently that such measures are being considered again.”
Providing this kind of support for businesses in hospitality should be seen as an investment in the wider economy – this is a sector which creates and sustains a large number of jobs, not least in our part of the world, and ensuring it emerges from the recession in good shape will benefit the wider economy. The government must be prepared to be flexible and adapt the energy support scheme as events unfold, to ensure that businesses which somehow managed to survive the pandemic do not face wipe-out.