A new, scaled back, energy scheme for businesses, charities, and the public sector has been confirmed ahead of the current scheme ending in March. The new scheme will mean all eligible UK businesses and other non-domestic energy users will receive a discount on high energy bills until 31 March 2024, rather than costs being capped. While some have welcomed the news, others critiqued the plan as being out of touch, a disappointment, and catastrophic. Government says it will help businesses locked into contracts signed before recent falls in the wholesale price manage their costs and provide others with reassurance against the risk of prices rising again. The government provided a package of support for non-domestic users through this winter, worth £18 billion per the figures certified by the OBR at the Autumn Statement. This is equivalent to the cost of an increase of around three pence on people’s income tax. The new scheme has a cap set at £5.5 billion. The Chancellor of the Exchequer, Jeremy Hunt, said: “My top priority is tackling the rising cost of living – something that both families and businesses are struggling with. That means taking difficult decisions to bring down inflation while giving as much support to families and business as we are able. “Wholesale energy prices are falling and have now gone back to levels just before Putin’s invasion of Ukraine. But to provide reassurance against the risk of prices rising again we are launching the new Energy Bills Discount Scheme, giving businesses the certainty they need to plan ahead. “Even though prices are falling, I am concerned this is not being passed on to businesses, so I’ve written to Ofgem asking for an update on whether further action is action is needed to make sure the market is working for businesses.” From 1 April 2023 to 31 March 2024, eligible non-domestic customers who have a contract with a licensed energy supplier will see a unit discount of up to £6.97/MWh automatically applied to their gas bill and a unit discount of up to £19.61/MWh applied to their electricity bill, except for those benefitting from lower energy prices. A higher level of support will be provided to businesses in sectors identified as being the most energy and trade intensive – predominately manufacturing industries. A long standing category associated with higher energy usage; these firms are often less able to pass through cost to their customers due to international competition. Businesses in scope will receive a gas and electricity bill discount based on a supported price which will be capped by a maximum unit discount of £40.0/MWh for gas and £89.1/MWh for electricity. East Midlands Chamber Chief Executive Scott Knowles said: “Businesses have been desperately seeking some certainty ahead of the new financial year, so the Government’s announcement of a two-year provides some clarity about the road ahead. “Scaling back the support towards energy costs will be a blow for many firms, however, as the cost-of-doing-business crisis that has thwarted them over the past year has been driven predominantly by escalating energy prices that remain at sky-high levels. “While it was anticipated that support would decrease, this will nevertheless squeeze many companies that are already fighting cost pressures from across the board – also including people, raw materials and fuel – and ultimately affect their ability to invest. “This should be of great concern to Government given that our Quarterly Economic Survey showed investment intentions for both plant and machinery, and people, among East Midlands firms declined throughout 2022 as confidence nosedived. “We know the energy crisis is predominantly the result of global headwinds but there is more Westminster can do to restore business confidence by looking at the barriers to business success that we can control. “We need to ‘get the basics right’, as we have outlined in our regional Business Manifesto for Growth, A Centre of Trading Excellence, by cultivating a wider business ecosystem geared around supporting success. “This should focus on incentives to invest in people, support certainty for firms by developing a long-term approach to business taxation and regulation, and ensure businesses and communities are digitally and physically connected locally and with the wider world.” Tom Thackray, CBI director for Decarbonisation Policy, said: “The extension to 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. “It’s unrealistic to think the scheme could stay affordable in its current form, but some firms will undoubtedly still find the going hard. The Government has done much to protect businesses through the energy crisis. It must remain open, flexible and pragmatic in its approach to volatile wholesale energy markets as the year unfolds. “Heavy energy users and those exposed to global trade are among some of the most impacted in the current crisis, so the additional support for these firms is a particularly welcome step.” Martin McTague, national chair of the Federation of Small Businesses (FSB), said: “Today’s decision to all but eliminate help through the Energy Bill Relief Scheme (EBRS) is a huge disappointment for small businesses. For those struggling, the discount through the new version of the scheme is not material. Many small firms will not be able to survive on the pennies provided through the new version of the scheme. “This is so out of touch. Two pence off a kWh of electricity and half a pence off gas is totally insignificant for small businesses, despite costing billions to the taxpayer. The Government will inevitably have to come back. “The current EBRS scheme provides certainty for a small business owner over their rates, and has made a material difference to the survival of many small businesses. The replacement scheme will do neither. “While the New Year should be a time of optimism and excitement, 2023 looks like the beginning of the end for tens of thousands of small businesses, which have been relying on the government energy support to survive this winter. “In addition to the withdrawal of the vast majority of support to cope with high energy prices, this decision also risks stoking inflation as small businesses bills rise, but their prices will rise at the same time. The EBRS original scheme suppressed inflation by 5% points, but this has been cancelled, today. Slashing support will drive higher inflation, just as we enter a recession. “Our latest research shows one in four small firms anticipate either closing, downsizing, or radically changing their business model when the Government reduces energy support after March. Five days after the Prime Minister’s pledges to restore optimism and hope and grow the economy, small firms will feel let down by the Prime Minister’s decision to call in the scheme decision planned for December, and cutting back the scheme to such a minimal state. “What’s certain from this catastrophic move is there’ll be a cliff edge after March. The small fish and chip around the corner, your local pub, and the family-run independent laundrette – all will see much higher bills. That’s on the Government. “Gambling that wholesale energy prices will continue to fall this year is transferring the risk of further energy price shocks to small businesses. Think of the children’s nursery in East Sussex which saw its energy prices reduce from £1,200 to £600 per month by the EBRS and the small engineering company in Leicester which is facing a 500% increase in gas bills – they will have no way to mitigate a sharp jump in energy costs. “Dividing the scheme into two tiers is sensible, but not so that the tier of support for any small businesses lighting or heating premises, or using freezers or ovens, has been set so low as to mean support diluted to such a feeble level. It would have been better value for money for small firms if the £2bn cost of their element of the scheme had been used to improve energy efficiency, to reduce the need for energy from the grid. “The Government said that taxpayers cannot prop up failing or unproductive firms, which is insulting to many small business owners struggling this winter. “Since the onset of Covid, we’ve lost half a million small firms. Allowing more well-run businesses to go under would be a false economy. But with this absurd degraded Energy Bills Discount Scheme, it looks like we’re getting there.”

Retailers enjoyed better-than-expected trading in discretionary categories in the run up to Christmas, according to new data revealed by accountancy and business advisory firm BDO LLP. However, the positive results come amid concern that sales growth continues to lag behind inflation, and heavy discounting required to generate these results will impact already thin margins and retailers’ profitability. According to BDO’s High Street Sales Tracker (HSST), total like-for-like (LFL) sales, combined in-store and online, grew by +9.8% in December from a base of +21.4% for the equivalent month in 2021, extending the trend of positive LFL results to a total of 22 months. Total in-store LFLs jumped by an impressive +15.5%, a result of increased footfall ahead of the festive period. Total non-store sales also rose by +5.0% from a base of +7.6% for the same month in 2021, when much of the country went into an unofficial lockdown towards Christmas, as COVID-19 case numbers increased rapidly. Total LFLs climbed by +5.02% and +5.52% in the first two weeks of December over the same weeks in 2021, and in the third week by +9.54%. In the final week (the final day of which was Christmas Day) total LFLs soared by +26.40%, above an already strong base in December 2021. In the final week leading up to Christmas Day sales were boosted by strong in-store LFLs as the snow cleared. The fashion sector drove much of the growth in discretionary spending, with total LFLs climbing by +16.0% from a base of 26.3% in December 2021. It was the highest performing category throughout December, which was the 22nd consecutive positive month for total LFLs. The homewares sector recorded another month of disappointing results. Total LFLs fell by -4.5% in December from a base of +7.4% in 2021, representing the seventh negative monthly result this year. This continued poor performance highlights that consumers have significantly reduced their spending on big ticket items, influenced by the cost-of-living crisis. December saw total LFL sales in the lifestyle category grow by +8.8% from a base of +27.9%, marking its best performance since July. In-store LFLs increased by +10.4% from a base of +38.3%, reflecting a positive performance through December. Sophie Michael, head of Retail and Wholesale at BDO LLP, said: “Although we have seen positive retail sales figures in December, these figures are still running significantly below inflation, which means sales volumes must still be down. “We are also comparing to a period last year when many consumers went into an unofficial lockdown, so retailers may consider this an underwhelming performance, being the first festive season in three years not affected by COVID-19. It is clear that, the cost of living crisis continues to weigh heavily on the appetite for non-essential spending. “Reports in November highlighted that retailers were holding high levels of inventory going into the final month of the festive season, and an expectation therefore that retailers would be encouraging consumers to purchase through high levels of discounting. “While this may have helped retailers to reduce stock holdings, it will come at a cost and undoubtedly have eaten into their margins and profitability. With high inflation on essentials, consumers are unsurprisingly focused on value and showing behaviours of trading down to make their purse travel further. Coming out of Christmas, retailers may struggle to wean their customers off discounts and return to healthier margins. “Food inflation rose to 13.3% in December, higher than CPI, and the higher costs of food will only put further pressure on consumer discretionary spending. These factors and the wider economic landscape are contributing to a gloomy start to the year for retailers, despite the better-than-expected December trading results.”