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Food and drink suppliers are facing the threat of huge spikes in energy bills, despite being told they will qualify for “maximum support” under a drastically scaled down government bailout.

A raft of “energy-intensive” food and drink production sectors were yesterday named among those able to claim the top level of taxpayer support, after Chancellor Jeremy Hunt set out what ministers claimed would be a lifeline for struggling companies.

However, the extent was described by one food industry source as “paltry” compared with the levels of funding the government had been providing under its initial bailout, which comes to an end in April.

Industry bodies warned the funding was so low it would leave companies at the mercy of oil and electricity prices, with war in Ukraine and other global economic crises leaving thousands of businesses vulnerable.

Meanwhile, retailers described the new bailout as “pointless” and said unless more was done to help, many small companies risked going to the wall.

The government is to provide a £5.5bn package of support for 12 months after April, compared with the £18bn it will have provided by the time the initial bailout expires, according to estimates from the Office for Budget Responsibility.

Whereas the current scheme caps the price of electricity and gas for businesses at £211 per megawatt hour and £75 per MWh respectively, from April, the government will replace the caps with discounts of £19.61 per MWh for electricity when wholesale prices are above £302 per MWh, and £6.97 per MWh for gas when prices are above £107/MWh.

However, it also announced special support for those most affected, which will receive a gas and electricity bill discount based on a supported price that will be capped by a maximum unit discount of £40/MWh for gas and £89.1/MWh for electricity.

Manufacturers of products including bread, cheese, confectionery, meat and poultry, sugar and oils are included in the list, along with the likes of breweries and cidermakers.

Hunt said the scheme “struck a balance between supporting businesses limiting taxpayers’ exposure to volatile energy markets”.

However, industry leaders said the bailout left even those companies entitled to the higher rate exposed to the mercies of the volatile energy markets.

Dairy, meat and fish processors face substantial rises in their energy costs this year, threatening to tip them over into financial difficulties,” said PTF director general Rod Addy.

“Wholesale gas prices have reduced, but the market remains vulnerable to developments in the Ukraine war, a cold snap and/or a surge in demand as China eases Covid restrictions. This further government help for all sizes of business is therefore vital and welcome and provides longer-term security. However, the battle to cut inflation must continue to protect business’s profits, safeguard food sector investment and guarantee shoppers’ access to affordable food.”

ACS CEO James Lowman described the government’s plan as “inadequate and poorly targeted”.

“The new package of business support is woefully inadequate,” he said. “ By moving to a subsidy on energy bills and failing to target specific sectors or those worst affected, the government has spread £5.5bn support over every type of business, the result being a level of subsidy that is ultimately pointless.

UKHospitality CEO Kate Nicholls said: “While I’m relieved the Chancellor has listened to our concerns and extended the scheme as a whole, the absence of a sector-specific package that helps vulnerable sectors like hospitality will still result in higher bills. 

“Our analysis shows the new, lower level of support will see a total £4.5bn hike in bills for the sector compared to the previous scheme.”

“This level of support does not offer much help to any businesses, especially those who are vulnerable due to high energy bills,” added an FWD spokesman.  ”The wholesale energy price will probably fall below the 30.2p per kwh threshold due to market forces, and therefore few businesses will get help, except those who signed fixed contracts at way above that level in 2022.

”However, the discount is so small it won’t make a huge amount of difference, and they will still be paying much higher energy bills than this time last year.”

FDF chief executive Karen Betts said: “Manufacturers are under a great deal of pressure as they try to keep their heads above water while absorbing very high and volatile energy costs in order to keep the cost of everyday food and drink as low as possible for shoppers.

“This support recognises the criticality of the food and drink supply chain and that our businesses use constant levels of energy year-round, and it should help slow record levels of food and drink inflation. What’s important is we remain in close dialogue with government as the situation continues to evolve throughout the year for which the support is being provided, given how fast-moving the energy situation has become.”

Meanwhile, energy experts said the clock was already ticking to March 2024 when the bailout is set to end.