Paying bills

UK Government Unveils Plans to Cut Energy Bills for Businesses

Conal Yarwood-Frost
21 Sep 2022

Over the last 18 months, we have continued to see record levels of businesses ceasing to trade as inflation and the energy crisis take hold, with recent reports showing that only 1 in 3 hospitality businesses are operating at a profit.

Business leaders have continued to warn unless support came from the government, they would be forced to cease trading. 

That help has now been announced. As of the 21st of September 2022, the government has released a plan to help businesses survive the winter. 

What are the plans? 

From 1st October 2022 to 31st March 2023, the government will enforce a cap on wholesale energy prices for businesses for six months. After six months is up, there will be a review to assess whether further support is needed. 

Once the new plan is in place, the price cap for businesses will be set at 21.1p per kilowatt-hour for electricity and 7.5p for gas. 

For some businesses, this cap represents a 50% discount for electricity and 25% discount on gas. The final discounted rate for individual businesses will be determined by their contract. 

Energy contracts for businesses differ to domestic ones in that businesses typically agree to a set period of time while domestic contracts are usually rolling. This means that businesses generally have no way of leaving their contracts and have to accept price raises as they come. 

After the plan is enacted, businesses will have their rates retroactively discounted at their billing date. This will equalise the price of their energy per unit. It is estimated that the price cap will cost anywhere in the region of £40 billion on top of the £130 billion plan to help domestic households. 

Our position

On the 5th of September, Epos Now released an open letter to Prime Minister Liz Truss. In it, we laid out 4 demands with the aim of helping everyday businesses survive the coming winter. 

Unfortunately, today's announcement falls short of the needs of merchants.

“Our high street is the lifeblood of British communities and plays an integral role in upholding our rich and diverse heritage. However, it has experienced unprecedented challenges over the past few years,” said Richard Nolan, Chief Operating Officer at Epos Now.  

“Despite having not fully recovered from the Pandemic, they once again face an existential threat with inflation and rising energy prices with inevitable mass business failures if adequate and immediate action isn’t taken.

“We propose the following policies are introduced until the energy crisis is resolved:

1) Reduction in VAT to 5% until the energy crisis is under control.

2) Introduce business rate rebates.

3) Re-Introduce a cap on energy price rises.  

4) Proactive launch of new decarbonisation and grant schemes to support SME’s to migrate to renewable and alternative energy sources.

“The Government stepped in previously mitigating thousands of small merchants to cease trading, but support is needed again, and the current proposal does not meet the needs.