As previously reported, the government has introduced a business energy support scheme. This will apply to businesses which are on fixed price contracts agreed after 1 December 2021 (it was originally only for contracts signed after 1 April 2022). The electricity cost is capped at £211 per megawatt hour, while the gas limit is £75 per Mwh. Distribution charges and other levies are applied on top of this so that the overall cap is comparable to that applying to domestic users.
This relief scheme applies only in the period October 2022 to March 2023. In the next few months, the government will be assessing business vulnerability and the potential of a follow-on scheme. In common with others in the food sector, UKFM will be highlighting that energy costs are likely to remain high after March 2023. This means that ending the scheme will increase business costs both for those already benefitting and businesses which have hedges or fixes in place that expire in the coming months – with resulting inflationary impact.
It remains to be seen how government will address this problem, and whether they can find a more market friendly approach to curbing inflationary impacts.
