Small business associations have reacted angrily to the government’s new Energy Bills Discount Scheme, which will replace the current relief arrangement when it finishes at the end of March.
The level of discount provided by the government will be dramatically reduced from April 1. The British Independent Retailers’ Association (BIRA) called it a “death slide” for independent retailers, calculating that typical small retail outlets that are receiving £6,400 worth of financial support under the current scheme will receive just £400 from April onwards.
BIRA chief executive Andrew Goodacre said: “The Chancellor said he wanted to avoid a cliff edge in terms of energy support. But it looks as if he has replaced the cliff edge with a ‘death slide’.
“Last year we saw energy bills for indie retailers increasing by 500%. These businesses will now have another £6,000 per annum of costs to deal with, at a time when consumer spending has fallen and other costs are set to increase.”
Martin McTague, National Chair of the Federation of Small Businesses (FSB) called the government “out of touch”.
He said: “Two pence off a kWh of electricity and half a pence off gas is totally insignificant for small businesses, despite costing billions to the taxpayer. Many small firms will not be able to survive on the pennies provided through the new version of the scheme.
“The current EBRS scheme provides certainty for a small business owner over their rates, and has made a material difference to the survival of many small businesses. The replacement scheme will do neither.”
The new energy discount will be calculated as the difference between the wholesale price and a given price threshold, with the discount phased in when the contract’s wholesale price exceeds the floor price, until a maximum discount is reached.
For most non-domestic energy users these maximum discounts have been set at £19.61 per megawatt hour (MWh), with a price threshold of £302 per MWh, for electricity and £6.97 per MWh, with a price threshold of £107 per MWh, for gas.
The new scheme will run for a 12-month period from April 2023 to March 2024 and apply to new fixed-price contracts and existing fixed price contracts that were agreed on or after December 1, 2021. As with the original scheme, suppliers will automatically apply reductions to the bills of eligible customers.
Some high users of energy, and those deemed to be particularly competitively vulnerable because of high energy prices, will receive a higher level of discount.
Making the announcement, Chancellor Jeremy Hunt said the current scheme was “unsustainably expensive”, and that energy subsidies for the next financial year will be capped at £5.5bn.
He said: “My top priority is tackling the rising cost of living – something that both families and businesses are struggling with.
“That means taking difficult decisions to bring down inflation while giving as much support to families and business as we are able.”
