The extension of the energy bill discount scheme will come as a relief to businesses – but the drop off in support will be unsustainable for many in the hospitality sector, UKHospitality has warned.
Analysis by the trade body shows the new, lower level of support will see a total £4.5bn hike in bills for the sector compared to the previous scheme.
The scheme is worth £5.5bn with scaled back government support coming in from the start of April, after the current scheme ends.
The Energy Bill Discount Scheme will reduce rather than cap energy costs for businesses and will last for 12 months.
The previous Energy Bill Relief Scheme fixed wholesale energy costs and came with an estimated £18bn price tag over the six-month lifetime of the policy.
The new scheme will cost the taxpayer £12.5bn less, with gas and electricity prices to be reduced per unit of power.
Bills will automatically be deducted by up to £6.97 per megawatt hour (MWh) for gas bills and up to £19.61 per MWh for electricity bills.
Businesses can only benefit from the scheme when when prices reach £107 per MWh for gas and £302 per MWh for electricity or higher.
A cap of £5.5bn has been set on the latest scheme in an effort to limit taxpayers’ exposure to spiralling costs.
There was disappointment over the lack of sector-specific support, meaning the hospitality businesses will face higher bills, UKH said.
“This will simply be unsustainable for many,” Kate Nicholls, chief executive of UKH said. “With no further, dedicated support for a vulnerable sector like hospitality, I’d urge the Government to consider other measures it can take to help the sector. One measure in particular that would make a significant difference would be increasing the business rates relief cap. For those suppliers to hospitality in the wider food and drink sector that have received additional support, we expect them to support the sector accordingly in their pricing.”
Nicholls called for a change in behaviour from energy suppliers, and a move award from “outlandish quotes and unjustifiable demands for enormous deposits”.
“This is an extremely challenging period for the UK’s hospitality sector,” Nicholls added. “which is so important to the economy and communities, and it’s essential the sector gets through it as best it can. If it does, I’m confident we can reach a situation where hospitality will return to generating economic growth, delivering hundreds of thousands of jobs, and investing in Britain’s high street and communities. This is all while it contributes billions to Treasury revenues.”
Speaking to Sky News, Chancellor Jeremy Hunt defended reducing supports.
When asked about the risk of businesses failures, Hunt said: “No government can continue to subsidise indefinitely higher energy prices. But what we can do, which matters to all those businesses, is to bring down inflation.
“That means we have to be responsible with public finances. But at the same time, today we’re announcing £5.5bn - that’s nearly a penny on income tax for every taxpayer in the country - to help businesses through this difficult period.”
The Federation of Small Businesses (FSB) called the government “out of touch”.
“Many small firms will not be able to survive on the pennies provided through the new version of the scheme,” said FSB national chair Martin McTague.
However, the Confederation of British Industry (CBI) said “the scheme will provide respite for many firms at the start of the year and help them plan ahead for the next 12 months with more certainty”.
CBI director for decarbonisation policy, Tom Thackray, said: “It’s unrealistic to think the scheme could stay affordable in its current form, but some firms will undoubtedly still find the going hard.”
