London: The British government unveiled a multibillion-pound bailout to help companies with their energy bills this winter amid soaring prices that threaten to put many out of business.
Under the plan, announced in a statement on Wednesday, the government will cap wholesale energy prices that feed into gas and power contracts for businesses for six months. Thereafter, a review will determine whether ongoing support is needed for targeted sectors.
The cap for businesses is set at 21.1 pence per kilowatt-hour for electricity and 7.5 pence for gas, the government confirmed, after Bloomberg reported the numbers on Tuesday. That would impose a discount of roughly 50 per cent on the winter contract for electricity and 25 per cent on gas for next month, but the exact discount depends on when a contract was agreed.
The government is trying to shield British businesses from the worst effects of energy prices that have soared since Russia squeezed pipeline flows to Europe after being sanctioned over its attack on Ukraine in February. Wednesday’s package, which may cost in the region of 40 billion pound ($46 billion), comes on top of a separate, 130 billion pound plan to help households with their power and gas bills.
“There’s a very real danger, before we put in place our business scheme, that cafes, pubs and shops could go out of business, and we simply couldn’t allow that to happen,” Prime Minister Liz Truss told reporters on Tuesday during a trip to New York. “That’s why it is right for the government to take the steps that we’ve taken.”
In the UK, business energy costs aren’t limited by regulator Ofgem’s household price cap, so many small businesses have shut or have faced seismic jumps in their bills.
Under the plans, businesses will have their rates retrospectively discounted at billing date to equalize the price per unit of energy they pay.
As well as businesses, the package covers public sector organizations, charities and consumers in Northern Ireland, who aren’t covered by the wider consumer package already announced by the government.
Even with the government’s help, businesses will still be paying much higher costs than usual to keep running. Before energy prices started rising last year, wholesale rates were fairly steady for years at around 5 pence for electricity and 4 pence for gas.