UK businesses are facing electricity bill rises of up to 133% from April compared to last year, Cornwall Insight’s Delivered Electricity Cost forecaster revealed.
Despite this representing a “worst-case scenario”, this highlights the severity of the ongoing energy crisis and the impact it can have on British businesses. Cornwall Insight said it demonstrates how high wholesale prices at the time of fixing, combined with a reduction in government support, have left some businesses with steep increases to contend with.
The primary cause of this electricity bill increase is the introduction of the less supportive Energy Bill Discount Scheme (EBDS) set to be in place from April 1. This will replace the outgoing Energy Bill Relief Scheme (EBRS), which since its introduction on 1 October 2022, indicates a scaled back amount of business energy support since the government called the scheme “unsustainable”.
The EBDS government scheme will set electricity at £19.61 per MWh with a price threshold of £302 per MWh and gas at £6.97 per MWh with a price threshold of £107 per MWh when introduced in April.
However, this will lead to a major gulf in terms of much needed support for British businesses amid the energy crisis. Recent research from npower Business Solutions via its 2023 Business Energy Tracker indicated that 67% of large businesses believe the EBDS scheme won’t go far enough to support them amid the energy crisis.
“The reduced levels of support offered to most businesses through the EBDS are expected to have financial and operational implications for non-domestic consumers across the UK. It will be especially brutal for those that locked in fixed bills during the peak of the wholesale energy market, who will no longer be able to count on the safety net of government support to cap their bills at an affordable level,” said Dr Craig Lowrey, principal consultant at Cornwall Insight.
“The impact of EBDS on businesses is not uniform and will vary significantly across sectors. Energy-intensive industries that will receive additional support under EBDS may experience greater financial stability, while vulnerable businesses, some already struggling post-pandemic, may find reduced support levels and expensive fixed contracts a tough pill to swallow.
“The impact on business cash flows could also have knock-on effects in other areas, with constraints placed on their ability to invest in decarbonisation and Environmental, Social and Governance (ESG) schemes, actions necessary to support the UK on its journey to net zero.”