Firms face 85pc cut in energy bill support

Sunak delivers blow to millions of struggling companies as subsidies make room for tax cuts

Rishi Sunak is poised to cut energy bill support for businesses by 85 per cent in a blow to struggling companies, as ministers scramble to protect the public finances. He and Jeremy Hunt, the Chancellor, have agreed to the overhaul in April after spending as much as £18billion on a six-month package of comprehensive aid. It is understood that help for the following year will drop to about £5billion. The plan said to be due to be revealed next week with costings largely agreed.

RISHI SUNAK is poised to cut energy bill support for businesses by 85pc in a blow to millions of struggling companies, as ministers scramble to protect the public finances.

No10 and No11 have agreed to an overhaul in April after spending as much as £18bn on a six-month package of comprehensive aid.

It is understood that help for the following year will drop to about £5bn.

The new plan is due to be revealed early next week and costings have largely been agreed, according to multiple government sources tapped into negotiations.

At present, businesses’ wholesale energy costs are capped at 21.1p per kilowatt hour (kwh) for gas and 7.5p per kwh for electricity, with the Government paying the difference between that level and high real prices.

The Prime Minister and Jeremy Hunt, the Chancellor, need to give the deal the final sign-off, with the exact figure for the reduction in gas and electricity prices not yet fully locked down.

The Treasury will argue the reduction is in part a result of recent falls in wholesale gas and electricity prices, meaning less taxpayer money is needed to keep bills low.

Government sources have also defended the move by arguing it is unrealistic to keep capping business energy costs, given other Treasury aims, including cutting taxes.

But some business figures argue that the drops in wholesale prices are not being fully passed on in the prices offered by energy firms to companies.

A senior government source familiar with the plans said: “The Government is subsiding every household and business with their energy costs.

“It is not sustainable in the long run. It means the Government has less space to focus on other priorities like lowering the tax burden. That is the raw reality.”

The huge interventions in the energy market, both for households and businesses, were bought in by Liz Truss shortly after she became prime minister in September.

The future plan for households was unveiled before Christmas, with a price guarantee continuing to April 2024. A typical annual household bill will be £3,000, up from £2,500 this winter.

The plan will continue for a year, taking the support to April 2024.

The Daily Telegraph understands the plan will remain universal, meaning all UK businesses will continue to get some support.

There will also be a more generous offer for energy intensive industries such as steel, ceramics, paper, glass and cement.

Wholesale energy prices have dropped this week with the unusually warm weather and are expected to continue falling in the coming months.

But the future of wholesale prices is unpredictable, with the uncertainty over Ukraine, and there are concerns energy companies will not pass on reductions to customers.

Kate Nicholls, chief executive at UK Hospitality, which represents 100,000 pubs, bars and restaurants, expressed concern over the change.

Ms Nicholls said: “Hospitality has been recognised by the Government as a particularly vulnerable sector. We are much more fragile than other sectors. Half of our businesses are operating at or below breaking even.

“Therefore any very rapid reduction in energy bill support will be particularly damaging.”

Other business figures accepted the current scale of support is unaffordable for the Government in the longer term.

A source at a leading business body said: “This extension will bring relief for many businesses, especially small and medium enterprises.

“The Energy Bill Relief Scheme has been a major plank of support but it’s unrealistic to keep it going in its current form due to the cost.

“The big question now will be whether additional support will be coming for those industries which are heavy energy users.”