Energy relief cut off puts UK industries at risk of closure

Manufacturing in the UK may no longer be “commercially viable” unless the government extends energy bills relief for firms when its existing support package ends in April, heavy power users have warned.

In a new position paper, the Energy Intensive Users’ Group (EIUG) has urged industries to be classified as ‘vulnerable’ and therefore eligible for continued costs support once the government’s existing package for firms runs out.

The publication of the paper coincides with a report in the Financial Times that the Treasury is considering some continued costs support for all businesses after the Energy Bill Relief Scheme (EBRS) closes on 1 April next year.

The government is due to complete its review of the EBRS, which provides a discount on non-domestic customers’ energy bills, by the end of the year.

The EIUG, which represents heavy energy users like ceramics manufacturers, calls on the UK government to classify such companies as vulnerable on the grounds that they are “disproportionally exposed” to high energy prices due to the nature of their manufacturing processes.

In addition, the EIUG argues big heat and power users are exposed to international competition that makes it more difficult to absorb or pass-through recent energy bills rises by raising prices without making themselves uncompetitive.

All companies currently exempt from social and environmental levies on electricity bills should be classified as vulnerable, as it says the European Commission has already done.

The EIUG also warns that higher energy prices in the UK risks the closure of energy intensive users because manufacturing in the UK “might no longer be commercially viable”.

The paper says electricity and gas prices are likely to remain “substantially higher” for the foreseeable future compared to recent years.

It says support should be directly provided to eligible companies in order to avoid the added transactional costs involved in intermediaries, such as suppliers, administering it.

The EIUG calls on the government to trigger legislation, which enables the government to provide targeted and temporary emergency subsidies to intensive users most exposed to the increase in energy prices.

The government has already increased the reliefs on environmental and social levies for intensive users earlier this year as part of its response to spiralling energy costs.

The EIUG’s position paper follows the publication on Wednesday (14 December) of new research by the Federation of Small Business, which warns that 24% of small businesses plan to close, downsize or restructure if energy relief is cut in April.

This rises to 42% of small firms in the accommodation and food sector, 34% in wholesale and retail and 29% of manufacturers.

A third (30%) of small firms expect to cancel or scale down planned investment if the government ends support on energy, while 44% are considering raising prices to cope with soaring bills.

The FT has reported that Jeremy Hunt is weighing up continuing some energy bills support for all businesses, partly because of how complex it would be to identify the firms that should benefit.

In last month’s Autumn Statement, the chancellor of the exchequer said that subsidising all firms’ energy costs after April would not be “sustainable” and needed to be “significantly” reduced.