In today’s challenging business landscape, companies face a myriad of obstacles, including skills shortages, escalating material costs, post-pandemic recovery, and the ever-changing political climate. Adding to these difficulties is the ongoing energy crisis, which exacerbates the situation for businesses across various sectors. In this blog post, we’ll delve into the impact of the energy crisis on businesses and explore the available government support for energy costs. Additionally, we’ll provide actionable insights on improving energy efficiency within your business, offering practical solutions to combat rising energy expenses. At Ariki Solutions, we understand the challenges businesses face and are here to help you navigate this energy landscape.
The Impact of the Energy Crisis on Businesses:
The energy crisis has imposed unprecedented challenges on businesses, forcing many to close their doors. In fact, between May and June 2022, company insolvencies in England and Wales reached a 13-year high, with a staggering 5,629 insolvencies recorded by the Office for National Statistics (ONS). These figures surpass the peak experienced during the global financial crisis in 2009.
According to a recent ONS survey conducted in August 2022, more than 20% of businesses identified soaring energy prices as their primary concern, a notable increase from 15% in February 2022. For smaller firms employing 10 to 49 people, this figure rose to 30%. Unfortunately, energy prices are not expected to significantly decrease in the near future. Furthermore, the upcoming Energy Bills Discount Scheme will primarily focus on supporting energy-intensive industries, potentially worsening the outlook for smaller businesses.
Government Support for Business Energy Bills:
Acknowledging the severity of the situation, the UK Government has implemented measures to subsidize electricity and gas prices for businesses, charities, and local authorities through the Energy Bill Relief Scheme. Running from October 2022 to March 2023, this scheme covers Great Britain and Northern Ireland and offers £18 billion in support. It applies to fixed contracts agreed on or after April 1, 2022, as well as deemed, variable, and flexible tariffs or contracts. Under this scheme, current prices stand at £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas.
The government’s intervention through the Energy Bill Relief Scheme has proven vital for struggling businesses, as it was implemented when wholesale energy costs in England and Wales were projected to reach £600 per MWh for electricity and £180 per MWh for gas.
Introducing the Energy Bills Discount Scheme:
To provide further relief, the UK Government has recently unveiled the Energy Bills Discount Scheme, which will replace the Energy Bill Relief Scheme. This new scheme will be active from April 2023 to March 2024 and offers a substantial £5.5 billion support package to businesses.
Discounts Available under the Energy Bills Discount Scheme:
Eligible non-domestic energy customers, including businesses, schools, and charities, will receive discounts directly from energy suppliers. For gas, the discount amounts to £6.97 per MWh, while for electricity, it is £19.61 per MWh. It’s important to note that these discounts are applicable to wholesale prices and not fixed prices. Businesses with energy costs below £107 per MWh for gas and £302 per MWh for electricity will not qualify for support under this scheme.
Discounts for Energy and Trade Intensive Businesses:
Energy and trade intensive businesses with high energy consumption will benefit from larger discounts. This is due to the inherent challenges they face when passing on these additional costs to their customers. Under this scheme, the discount will be applied to 70% of the energy used by qualifying businesses. The maximum discount amounts to £40 per MWh for gas and £89.1 per MWh for electricity. The threshold prices, at which the discount applies to these energy-intensive businesses, are set at £99 per MWh for gas and £185 per MWh for electricity.
Check Your Energy Contracts:
An initiative has been launched to take collective legal action against leading UK energy suppliers. This aims to support businesses that have allegedly faced inflated charges for gas and electricity, stemming from undisclosed commission payments made to third-party brokers.
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In these challenging times, the energy crisis presents significant hurdles for businesses. However, with the support of government initiatives and a proactive approach to energy efficiency, companies can navigate these challenges and thrive.
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