Thousands of food and drink businesses may have been saved from closure this winter by a government bailout on energy bills, but ministers have been warned the threat will return in six months without longer-term support.
Industry leaders warmly welcomed as a lifeline the “unparalleled” package of support announced by business secretary Jacob Rees-Mogg, which will see energy bills capped at less than half of anticipated winter levels facing businesses across the sector.
Rees-Mogg confirmed today the government would legislate to ensure energy companies passed on the bailout to food businesses facing average bill increases of 300% to 400%.
Under the new scheme, which will come into force from 1 October, prices will be fixed for all non-domestic energy customers at 21.1p per kWh for electricity and 7.5p per kWh for gas for six months.
The government confirmed the bailout would apply to fixed contracts agreed on or after 1 April 2022, as well as to variable and flexible tariffs and contracts. It will only apply to energy usage from 1 October 2022 to 31 March 2023.
However, huge questions remain over which businesses will receive support after the six-month period, with experts warning the food and drink sector’s energy crisis was likely to last much longer. The government, which will review the scheme in three months’ time, has said additional help will be aimed only at “targeted” sectors, to be specified.
“We welcome the scope of the government’s Energy Relief Scheme and the speed with which it’s being rolled out,” said FDF CEO Karen Betts.
“It addresses the largest and most volatile cost pressure facing our industry right now. Although some aspects of the scheme are still to be clarified, it offers relief to food and drink manufacturers across the UK.”
UKHospitality CEO Kate Nicholls described the intervention as “unprecedented” but said it was vital it was not just a case of “moving the cliff edge”.
“Today’s announcement will give businesses some confidence to plan for immediate survival, but we will not relent in our pursuit of a more comprehensive package to safeguard businesses and jobs,” she said.
“The levers of reduced VAT and business rates reliefs are still available to the government, and there must also be a comprehensive package to ensure that there is no cliff edge when these measures fall away.”
BBPA CEO Emma McClarkin added: “We welcome this very significant and critical intervention by the government.” She described the measures as a “lifeline” for thousands of businesses.
ACS CEO James Lowman said: “We strongly welcome the government’s support package, which will provide a lifeline for the UK’s local shops, enabling them to keep trading and serving their communities.”
James Bielby, CEO of the FWD, said: “FWD welcomes the support announced today. However, some customers may face cashflow problems as the support won’t be received until November.
“Additionally we are in the dark about what happens at the six-month point. Government are yet to define a ‘vulnerable business’ so there is uncertainty as to which sectors or what criteria will qualify for ongoing support.”
PTF director general Rod Addy said: “We are pleased business secretary Jacob Rees-Mogg has responded to the PTF-led letter to government, which the heads of many concerned trade bodies signed.
”Any reduction in projected energy costs will provide suppliers and customers alike with much-needed relief. The news that this automatic relief will be applied to contracts fixed since 1 April this year for as long as the contract was agreed will also be welcome.
“However, we still await more details about how the Energy Bill Relief Scheme will apply to individual businesses. The energy crisis will not cease any time soon, especially given Putin’s declared intentions to escalate Russia’s conflict with Ukraine. We would therefore press government to continue this support beyond six months to offer longer-term certainty to enable them to plan ahead more effectively, as well as looking to it to develop sustainable long-term energy security for UK industry.
“Government also needs to recognise the special and vital role of food manufacturing in considering support beyond the initial period.”