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UK Government’s New Energy Bill Discount Scheme Leads To Vastly Reduced Support For Struggling Operators

UK Government’s new Energy Bill Discount Scheme leads to vastly reduced support for struggling operators

From the 1st of April 2023 all eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill.  This greatly reduced level of support will be in place for 12 months and customers do not need to apply for their discount. As with the current scheme, suppliers will automatically apply reductions to the bills of all eligible non-domestic customers.

The Chancellor has also written to OFGEM, asking for an update in time for the Budget on the progress of their review into the non-domestic market. He has asked for their assessment of whether further action is needed to secure a well-functioning market for non-domestic customers following reports of challenges certain customers are facing, including in relation to the pricing and availability of tariffs, standing charges and renewal terms, and the ability of certain sectors to secure contracts.

In responding to the Government’s new Energy Bill Discount Scheme the SLTA released the following statement:-

The Scottish Licensed Trade Association has expressed “very serious concerns” over the introduction of a new £5.5 billion scheme to support businesses with their energy, announced yesterday in the House of Commons.

With the current cap on the wholesale unit cost of electricity and gas for firms set to expire at the end of March, it will be replaced with a new scheme that offers a discount on wholesale prices rather than a fixed price.

Colin Wilkinson, SLTA managing director, said that struggling hospitality businesses were desperate for financial support and queried how effective this new scheme will be, given the vastly reduced reduction in the level of support at a time when businesses are recovering from the pandemic and still paying off debts incurred during Covid.

He said:

“Many businesses in the hospitality sector in Scotland have had a bitterly disappointing December – normally one of the year’s key trading periods for the sector – as a direct result of the economic crisis, train strikes, poor late-night public transport and lack of taxi provision in some towns and cities. We’re into the second week of January and these challenges remain.

So, to hear that the current energy scheme is to be replaced with one that offers a discount on wholesale prices rather than a fixed cap price means that businesses will receive a vastly reduced level of support – understandably, we have very serious concerns about the impact this will have on the hospitality sector.

Obviously, we are grateful for any government support but this new Energy Bills Discount Scheme does not, in our view, offer much hope for vulnerable sectors like hospitality when you consider that energy costs now account for around 8-10% of turnover for an average pub or bar. Energy is the second-highest cost for hospitality venues.

The cost of this scheme, at £5.5bn, is not insignificant but when you drill down into the detail, small businesses in particular will not be much better off. James Cartlidge, the Exchequer Secretary to the Treasury, said that the discount would be the equivalent to a £2,300 saving for an average small pub or bar and of course every little bit helps. But it’s not nearly enough.

We said before Christmas that we know of many businesses set to close permanently amid the cost-of-living crisis and other ongoing pressures and there is also that other elephant in the room – the fact that we urgently need meaningful intervention on business rates.”

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