The Confederation of British Industry (CBI) has urged the government to extend the Energy Bill Relief Scheme beyond March 2023 for high energy users to prevent plunging British industry into disarray.
The Energy Bill Relief Scheme has been instrumental in protecting business energy consumers over the winter so far by capping the predicted MWh price for electricity and gas for businesses to £211/MWh and £75/MWh respectively.
However, alongside the domestic targeted Energy Price Guarantee under the Energy Prices Bill, the current cap on energy is scheduled to increase from April 2023. The CBI has called on the government to provide additional funding and cashflow support for vulnerable businesses across the UK.
Although the UK government has indicated that there will be support measures in place from April 2023, what form this support will be in hasn’t been fully disclosed. This lack of transparency has had an impact on the UK’s businesses who are unable to fully prepare beyond the Energy Bill Relief Scheme. The requirements have also not been revealed as to who will qualify for additional support.
To highlight the difficulties for businesses, the CBI conducted a survey of nearly 700 businesses, which revealed that firms expect their energy costs to more than double (151%) if government support were no longer available from April 2023.
The survey also showed that two-thirds of firms (67%) would be exposed to an increase in energy bills when the Energy Bill Relief Scheme expires at the of March, rising to three quarters (74%) by the end of June next year.
This follows data disclosed by both the National Energy Action (NEA) and the Social Market Foundation (SMF), which revealed that over seven million households face the risk of fuel poverty come April 2023 prompting calls for politicians to provide “workable long-duration policies”.
The NEA estimated that around 8.4 million UK households will be in fuel poverty from April 2023. The SMF also suggested that 7.2 million will struggle to pay energy bills from April 2023.
“The high cost of energy is dominating the decisions that businesses are making each and every day. There are no easy answers in all this, but the government will have to keep supporting the most vulnerable firms to help them stay competitive, to build resilience and in some cases to avoid collapse. On average, firms expect their bills to more than double next April,” said Matthew Fell, CBI chief policy director.
“The Energy Bill Relief Scheme has been crucial in cushioning firms from spiralling energy costs. The CBI understands and supports the Government’s decision to target the scheme from April 2023 onwards. The cost is simply too great to continue indefinitely, and the need is not evenly distributed among all businesses.
“Any extension must be aimed at firms that use the most energy, just as many of our European counterparts have already committed to doing. And businesses need to know before the year is out if they qualify or not.”
In a bid to rectify the difficult period once the Energy Bill Relief Scheme ends, CBI has recommended three distinct policy options that could be implemented to mitigate the impact of rising energy costs in the short to medium term.
The first policy recommendation calls on the government to provide direct support to help vulnerable firms pay energy bills from April 2023 onwards. CBI state that the scheme should go beyond the definition of energy-intensive industries to include other industries such as those in the automotive sector and food and drink manufacturers.
Grants should also be made available to small and medium enterprises (SMEs) through local authorities to enable local leaders to manage risks to businesses in strategically important sectors.
CBI has also called on the government to provide additional cashflow support to enable companies to adjust to the high-cost energy environment. An example by instructing HMRC to replicate ‘time to pay’ flexibilities granted during the pandemic to take account of energy price rises alongside publicising that the Recovery Loan Scheme remains available and open to applications.
The last recommendation is to use policy to drive a step change in business energy investments to improve the security and resilience of the system. For businesses investing in energy efficiency, or making any green capital investment, the CBI believes capital allowances should be increased to 120% of the investment values.
“We must also take heed of the lessons from the pandemic, where providing additional cashflow support, especially to SMEs, was critical to seeing businesses through this period. Allowing businesses to defer energy bills if needed and providing grant funding through local authorities can play key roles in 2023,” Fell said.
“Government support has been considerable already, but with the UK falling into recession, we must ensure any downturn is short and shallow so extending targeted support must be on the cards.”