Energy UK calls for ‘Covid-style’ support package for businesses

Energy UK has urged the government to provide a “Covid-style” support package for businesses to help them pay their bills as they face a steep rise in energy costs.

In a letter to chancellor of the exchequer Nadhim Zahawi sent ahead of the announcement of the new Conservative leader on Monday, the trade body recommended a series of measures including government-backed loans, grants and tax cuts.

With wholesale gas prices having risen ten-fold since the beginning of the year, Energy UK said non-domestic customers, which are not protected by Ofgem’s price cap, are experiencing a massive increase in costs as they renew their energy contracts. It said there are particular concerns over the viability of small businesses.

During the coronavirus pandemic, the government introduced a raft of support measures for businesses, including a series of loans that were provided by financial institutions but backed by government guarantees. Energy UK said a similar loan guarantee scheme could be quickly implemented to help businesses through current energy crisis.

It said the government could also providing funding for grants as it did during the pandemic when it made £45 billion available through local authorities in tranches.

Furthermore, Energy UK called for the removal of VAT on energy bills, which is currently set at 20% for many non-domestic customers, compared to just 5% for households. It said the government could also provide exemptions and reliefs from business rates, particularly for sector as retail and hospitality, as it did during the pandemic.

Lastly, the trade body proposed the creation of a high-level energy expert panel that would be tasked with tackling high energy retail prices for both domestic and non-domestic customers, including establishing a glide-path for moving away from the deficit fund tariff for households backed by the organisation and many of its members.

Over the longer term, Energy UK said the government should look at enduring ways to reduce energy bills for businesses such as more funding to help them improve their energy efficiency.

Energy UK director of regulation Dan Alchin said: “There’s understandably been a lot of focus on the price rises facing households, but businesses are also having to cope with sharply increased energy bills. Over the past year, the cost of energy, especially gas, has climbed to levels that nobody expected so it can be a very nasty shock for such customers when they see how that has fed through to prices.

“The government helped support businesses through the pandemic and sadly, this current crisis is of a similar magnitude for many of them – threatening closures, job cuts and higher consumer prices. It also presents huge difficulties for public sector customers like schools, hospitals, local authorities, leisure centres and many other places serving their local communities.

“Given the consequences for these customers, as well as the wider economy, we are urging the new prime minister and government to put support in place as they did during the pandemic. Having worked so hard to get so many of these customers through one crisis, we need to do everything possible to avoid losing them to this one.”