Liz Truss is eying a major bailout package for businesses amid the energy crisis which could reportedly slash bills in half. It comes after the Prime Minister unveiled a detailed package of support for households last week involving a £2,500 bills freeze, but failed to include the same level of detail for businesses. However, she did pledge that businesses would get the “equivalent” level of help she had promised families, which could now be on the way thanks to the Government bailout.
Bloomberg reports that the plans would involve a discount on the wholesale price that’s included in business energy contracts by fixing it to around the equivalent amount charged to households. This means that there could be a 50 percent discount for businesses that have recently fixed their contracts.
The slashed costs are reportedly set to stay in place for six months from October, but could potentially be extended. The exact amounts will depend on the wholesale price of energy, which has proved to be exceptionally volatile following Russia’s war in Ukraine and Vladimir Putin’s gas cuts to Europe, at the time when a business signed its energy contract.
Sources told Bloomberg that the Government will publish the discounts suppliers need to apply once they issue bills to their customers. The businesses will then receive rebates which would apply to contracts they had already signed earlier this year.
The support package is expected to cost around £40billion and it comes as business leaders urge Ms Truss to provide support as many firms struggle to cope with skyrocketing energy costs.
It also comes after the Prime Minister’s spokesperson promised that while more details about the support scheme would be unveiled next week, the help may have to be backdated, which could imply delays.
Martin McTague, from the Federation of Small Businesses, has warned that as hundreds of thousands of firms are coming to the end of their fixed-price energy contracts at the end of this month, they are still somewhat in the dark as they do not know how much will they need to pay from October 1.
He told the Scotsman that, the Government has the potential to provide a “lifeline” to businesses if support is administered “in the right way”, but warned that without such support, firms could face a devastating winter as prices and demand could soar.
Last week, industry sources stressed the urgent need for Ms Truss to clarify the details of the plans for how she will support businesses this winter. One source told The Telegraph: “We are talking in days — we have to come up with a solution.”
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The source added that providing assistance to businesses is “hugely complex” due to the way in which companies pay for energy. This is because different businesses pay different rates based on their industry and usage, meaning there is a huge variation in different negotiated contracts. This makes it more difficult to draw up an overarching policy to encompass the same level of support for all companies.
But the Prime Minister has said that her Government will work with businesses to review where support should be targeted to “make sure those most in need get support”, adding that a review will be announced within the next three months to give businesses “certainty”.
Ms Truss’s spokesperson said last week: “We will confirm further details of the business support scheme next week. The scheme will support businesses with their October energy bills and that includes backdating if necessary.”
It came after businesses figures warned that support for industries may not be introduced until November. A report in the Financial Times warned: “Executives have been told in recent meetings with the Government of the risk the scheme may not be ready until November, although officials said they still hoped the scheme would go live next month.”
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One Government official reportedly warned that the plan “is not worked through yet”, saying that “I don’t know whether it will come in before November. There’s some debate about whether it can be brought forward and happen before then”.
While Ofgem’s staggering £3,549 price cap will be swerved by billpayers, the luxury of a price cap is something limited to households, with businesses having no limits on what they may have to fork out to account for surging energy price hikes.
The FT report warned that “ministers and officials are still struggling to work out how to limit companies’ energy bills”, but noted that the Government will “provide energy suppliers with the difference between a new lower price and what energy retailers would otherwise charge business customers”.
However, the report noted that ministers had not yet decided on the exact system for implementing it. While not denying that help may not be introduced until November, a Government spokesperson has said that Westminster is working “at pace” to come up with a solution, claiming that more details of the scheme would be laid out as soon as possible.