Groups representing more than 100,000 UK businesses have accused ministers of taking a “scattergun” approach to helping businesses with their gas and electricity costs, amid fears many will be forced to close this year due to unaffordable bills.
Earlier this month, the chancellor, Jeremy Hunt, confirmed that a program designed to cushion the blow of huge monthly energy bills would become significantly less generous from April.
In a letter to the business secretary, Grant Shapps, industry bodies including the Association of Stores (ACS), the Federation of Small Businesses and UK Hospitality called on the government to review its approach to allowing companies to renegotiate contracts agreed when wholesale gas prices peaked last summer.
It is estimated that companies that signed fixed energy price contracts between August and October last year will receive a discount of between 25% and 55% on their electricity under the existing program which runs until April. After that, most businesses will get discounts of just 0.7% on gas and 2% on electricity bills.
In the letter, seen by the Guardian, industry bodies say: “We call [the business department] and Ofgem for encouraging energy suppliers to allow the most vulnerable companies to renegotiate or ‘mix and extend’ their energy contracts to reflect the significantly lower wholesale prices now available.”
They argue that companies should be allowed to renegotiate contracts with energy suppliers if they can prove they signed up for high prices and that the contract ends after the current government plan ends at the end of March.
Wholesale gas prices started rising in late 2021 and jumped after Russia’s invasion of Ukraine in February 2022, peaking in August on concerns about winter gas supplies. Gas prices have fallen in recent weeks, but that drop has yet to affect home and business bills as suppliers buy their energy in advance.
James Lowman, chief executive of ACS, said: “The government has failed in its attempt to come up with a solution to help businesses that need urgent support with energy costs, instead opting for a comprehensive approach that will not affect the bills of thousands of shops this year they are facing a huge increase in their energy bills.
“Without immediate intervention to allow businesses to renegotiate fairer contracts, local shops will be forced to close their doors in droves.”
Emma McClarkin, chief executive of the British Beer & Pub Association, said: “For many vulnerable businesses, this will be the difference between being able to continue as a viable business or not.”
Hunt reduced the discount through the program due to concerns about the cost to the exchequer. The first six months of the policy, introduced in October, is estimated to cost £18bn and the chancellor has set a cap of £5.5bn for the final 12 months of the scheme
As well as cutting aid to businesses, Hunt also made the energy price guarantee for domestic customers less generous. From April, the cap on a typical household’s gas and electricity bill will rise from £2,500 to £3,000 over the next 12 months.
Labor said they would provide support if they were in power. The shadow chancellor, Rachel Reeves, said in a speech to the Fabian Society on Saturday that the move would be funded by an extended tax on energy company profits, which it estimates could raise an extra £13bn if it is backdated to 2022.
Asked how long the bailout would last, Reeves told the BBC’s Sunday with Laura Kuenssberg: “We’ve committed to three months, but we think we could raise an extra £13bn through the windfall tax and this announcement I made around freezing the price cap… costs a fraction of that.”