Industry reacts to government action on energy
Friday, September 9, 2022
Figures from industry and business have reacted to new Prime Minister Liz Truss’s actions unveiled yesterday (8 September) to support people and businesses with their energy bills.
From 1 October, a new ‘Energy Price Guarantee’, which limits the price suppliers can charge customers for units of gas, will mean a typical UK household will now pay up to an average £2,500 a year on their energy bill for the next two years. This is automatic and applies to all households.
This will save the average household at least £1,000 a year based on current energy prices from October and is in addition to the £400 energy bills discount for all households.
This applies to all households in Great Britain, with the same level of support made available to households in Northern Ireland.
Truss said businesses and public sector organisations will see equivalent support over the winter, and the action is expected to deliver “substantial benefits” to the economy – boosting growth and curbing inflation by four to five points, reducing the cost of servicing the national debt.
“As businesses have not benefited from an energy price cap and are not always able to fix their energy price through fixed deals, many are reporting projected increases in energy costs of more than 500%,” Truss said.
“A new six-month scheme for businesses and other non-domestic energy users, including charities and public sector organisations like schools, will offer equivalent support as is being provided for consumers.
“This will protect them from soaring energy costs and provide them with the certainty they need to plan their business.”
She added that after this initial six-month scheme, the government will provide ongoing, focused support “for vulnerable industries” and that there will be a review in three months’ time to consider where this should be targeted to make sure those most in need get support.
“The government will provide energy suppliers with the difference between this new lower price, and what energy retailers would charge their customers were this not in place.
“Schemes previously funded by green levies will also continue to be funded by the government during this two-year period to ensure the UK’s investment in home-grown, secure renewable technologies continues.”
The government is also taking various actions to accelerate its domestic energy supply, increase its energy resilience and achieve its ambition to make the UK an energy exporter by 2040, including launching a new oil and gas licensing round as early as next week, and lifting the moratorium on UK shale gas production.
This move on fracking is expected to enable developers to seek planning permission where there is local support, “which could get gas flowing in as soon as six months”.
The Federation of Small Businesses (FSB), felt that yesterday’s statement left a number of questions unanswered, including: What will be the fixed unit prices (and standing charges) from 1 October? What practically will now change – will energy retailers suspend high quotes and contract offers and recalculate from 1 October?
Also: Will those who have accepted hugely increased bills in recent weeks be able to renegotiate to bring their bills down to reasonable levels? And as a small business normally gets quoted for at least 12 months, does that new quote include six months at a low rate and six months at a high uncapped rate? How does the energy retailer know who to quote extra support to, for the second six-month period?
Meanwhile, the Energy Intensive Users Group (EIUG) said it welcomes the Energy Price Guarantee for business, “providing some breathing space for industry whilst the government considers longer term measures”.
“Consideration of what support may be necessary after six months must include energy intensive industries who would be put at a significant competitive disadvantage internationally if energy prices defaulted back [to] their escalated levels. It is vital we now see more detail of how [the] guarantee will work in practice, especially for energy intensive industries.
“The EIUG also welcomes the temporary suspension of green levies, though it is of the view that these levies should be moved to direct government funding on a permanent basis.”
Charles Jarrold, CEO, BPIF
“I was really encouraged that government have seen what’s going on. We’ve been making really strong representation about both individual company feedback and we’ve got a high-level survey out at the moment that we’re getting feedback on. I think that’s been really helpful to government, it’s been so important to feed that information back because what’s going on out there is just intolerable to businesses.
“We will be lobbying extremely firmly [to ensure print is classified as a ‘vulnerable industry’ after six months], and that doesn’t start now – that’s already started. The reality is that the help was absolutely vital because of the prices that are going around in the wholesale market. If those prices are still there in six months’ time, the crisis that we have now will still be there and the sector will need support or it will have a very serious impact on it.
“Help will still be needed in six months if conditions haven’t changed. We recognise the cost of that, but the cost of the business and skills losses is massive as well if we don’t have that support.
“I think we also need to look really closely at what this support means right now. It is really good news that government have seen the problem and reacted, but the six month limit is a worry and we need to also get a lot more detail on how this support is actually going to work – to what extent is that going to mitigate bills firstly, and secondly, for those organisations who have just felt compelled to enter into fixed price deals, for example, how will they be affected?”
Brendan Perring, general manager, Independent Print Industries Association (IPIA)
“Hundreds of printers and their supply chain faced shutting down before the end of the year because they simply could not go onto new contracts for utilities that were up to five or more times their previous level.
“The announcement from government has delayed catastrophe for a further six months, but the mission for the IPIA – and all its colleagues at the GPMA – will be to work in concert to ensure print is classified as a ‘vulnerable industry’, so that it is protected by a price cap until such time as the global energy market returns to normal levels.
“The announcement was very welcome – as we understand it, they have set the price cap for businesses as equivalent to domestic users back to what would be for an average household £2,500 a month.
“What this will mean for business is less clear at this very moment, but we expect that it will reflect the pricing a business was experiencing in Q2 2022. While still very tough for printers and their supply chain to manage, it should forestall a high level of business shutdowns and redundancies.
“The vulnerability of our sector is not due to the utility increases alone, but due to a confluence of factors, which include: an average across the industry of a 60% revenue lost during the Covid period, spiralling paper price increases and spare part shortages due to industrial action and the Ukraine crisis, and finally a significant loss in competitiveness due to Brexit legislation with the European print industry.
“With the utility crisis being the most immediate existential threat, I am talking to member after member that have just turned off the heating and print room staff being asked to prepare for a very tough winter.
“My top line statement is that the government must go further and ensure vulnerable British industry is protected by a price cap – specifically print that is particularly energy intensive – until such time as the global market reaches normal levels of activity and pricing.
“If not, we face the prospect of tens of thousands of job losses and a fatal blow being made to one of the UK’s last highly competitive and productive manufacturing sectors.”
Steve Freeman, director of energy and environmental affairs, Confederation of Paper Industries (CPI)
“We welcome the Prime Minister’s statement which makes signals towards support for non-domestic users, however we require further detail and clarify.
“With huge number of companies across the whole economy facing potential ruin if energy costs continued to rise, it’s clear the government needed to act, and so we welcome this intervention. However, there is no detail yet behind the headlines to allow us to understand the implications of what’s being proposed – and as always, the details that are important!
“It appears that initial support for the non-domestic sector is only planned to last for six months, meaning that companies still can’t plan ahead with any certainly.
“It’s also concerning to see the headline that the non-domestic support will be broadly similar to the domestic price cap. Energy markets have traditionally recognised economies of scale, meaning larger purchases by industrial users result in lower prices – we know BEIS is concerned about this issue and is seeking to design their scheme with this in mind.
“It’s also disappointing to see no mention at all of energy efficiency – there should be a huge national drive to use less energy.”
Michael Green, managing director, MacroArt
“In such testing times for all industries, it’s good to see that government is recognising the challenges that these unprecedented energy price-hikes are presenting. However, as always, the devil will be in the detail, and further light needs to be thrown on the true content of such a package, especially in terms of the continuity of the support after the initial six-month period. We keenly await further information that will enable us to plan more effectively.”
Dave Dalton, chair, The Energy Intensive Users Group (EIUG)
“This is a timely intervention from government for those energy intensive industries facing daunting energy price increases in the winter. As various European government have already announced support for energy consumers, including for their energy intensive industries, to reduce energy costs, it is crucial that the UK government matches its support to ensure a level-playing field.”
Martin McTague, national chair, Federation of Small Businesses (FSB)
“It’s a huge relief for millions of small businesses to hear confirmation they will be part of the government’s plans to help on energy. Many have been pushed to the brink by crippling energy bills, and so it is welcome that help is on the way.
“The toxic combination of uncapped energy hikes, high taxes, inflation and negative growth have become an existential threat for many.
“FSB is proud to have played our part in championing small businesses’ plight and pitching in ideas to the new team in power, and so we have contributed to today’s intervention.
“Constricting the scale of energy bills for small businesses is unprecedented; we now have a high-level commitment in principle to help businesses get through the winter intact. Done right, this will be a lifeline – protecting jobs, communities, and future economic recovery.
“However, the announcement is very high-level and sparse on detail so we will be working with the new government to clarify what happens next. Small businesses’ instant reaction is that this is not enough information, yet, for them to plan.
“This must not result in a cliff-edge after six months, with the withdrawal of support to all but ‘vulnerable’ targeted industries, sectors or types of business. The definition of who falls in and out of that support will need to be looked at carefully at the three-month review.
“Our work on vulnerability of small businesses to energy costs has revealed huge bills causing damage in virtually any sector that uses energy in any meaningful way, just like most households. Any future definition of ‘vulnerable industries’ will need to be broad, realistic and fair.
“The government should also make good on its commitment for comprehensive help for all small businesses affected. If any have energy circumstances such that, in practice, they turn out not be covered by the measures announced today, the government must keep an open mind and ensure policy decisions do not create another group of disenfranchised or excluded small businesses without support, just like it did on income support during Covid.”
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