Energy discount for all firms planned

Chancellor drawing up support package ahead of mini-budget to stave off threat of bankruptcies

Businesses will be offered a blanket discount on energy bills to prevent a wave of bankruptcies under proposals being considered by Kwasi Kwarteng, the Chancellor, ahead of next week’s mini-budget. Officials are leaning towards a scheme in which companies get a fixed reduction to the rate they pay per kilowatt hour – a different mechanism to the one used for households, where the maximum that energy companies can charge is capped instead.

A BLANKET discount on business energy bills is being considered by Kwasi Kwarteng ahead of next week’s mini-budget as he draws up options to prevent a wave of bankruptcies.

Officials are examining a potential scheme in which companies will get a fixed reduction to the rate they currently pay per kilowatt hour on their bills – a different mechanism to the one used for households, where the maximum that energy companies can charge is capped instead.

A Whitehall source said a discount would be the simplest and most effective way of delivering support, but cautioned it is just one of a number of mechanisms being looked at by ministers.

Mr Kwarteng, the Chancellor, is preparing to set out a detailed plan to tackle the worst cost of living crisis since the 1970s in a fiscal statement next week, with help for households and companies expected to be accompanied by a raft of tax cuts.

Liz Truss, the Prime Minister, has promised that businesses will be given six months of support equivalent to the price guarantee that she has already announced for households. However, the Government is still working out how to deliver this.

Under the support scheme for households, consumers will pay a maximum 34p per kilowatt hour for electricity and 10.3p for gas, which amounts to average bills of £2,500 compared to £3,549 if the cap was not in place. This difference is covered by a taxpayer subsidy for the energy companies.

However, a similar package for businesses is far more difficult to draw up because they have individual arrangements with energy suppliers in which the price they pay can vary widely depending on their contract.

The proposal being considered would not cap these charges, but offers a discount of a set number of pence per kilowatt hour from what the company presently pays. City analysts believe it would be easier for ministers to deliver and cost. Many businesses agree fixedprice contracts lasting for one year or more in October.

However, businesses have warned support may not arrive in time for next month’s renewals. No10 has promised that payments will be backdated if the aid is delayed.

The six-month energy bills package for companies is expected to be unveiled next week, and longer support will be available to the worstaffected businesses.

One industry source said: “It’s too complicated and that’s the problem. Businesses have totally different sorts of contracts so they’re having to work out how that can work. There’s no legislative consumer cap in the same way.”

Martin Young, analyst at Investec, said a discount on business bills would be the “most practicable”.

He said: “The business market is more difficult to cost, not least because of the absence of a reference price that the tariff cap provides in the domestic market.

“For this reason, a pence per kilowatt hour discount for business consumption has its merits from a costing point of view, and likely easier to administer.”

Slashing bills is deemed critical for the survival of many businesses, particularly those in energy intensive industries.

The Federation of Small Businesses (FSB) has warned “hundreds or even thousands of small businesses will be disincentivised to keep going” unless clarity on the support is provided.

Martin Mctague, chairman of the FSB, said: “Many small firms have October 1 as their start date for new contracts. If energy help comes into effect next month, or even November with backdating, at least businesses can plan around that.”

The Prime Minister said that more focused support will be provided to vulnerable industries following the end of the initial six-month scheme. She highlighted hospitality companies, such as pubs and restaurants, as being in line for extra support while leaders in energy intensive sectors including steel are also hopeful of more aid.

The Department for Business did not respond to a request for comment.