Chancellor Jeremy Hunt is exploring plans to keep providing all British businesses with help for their energy bills once winter has passed, in what would be a break with current government policy to limit such aid to “vulnerable industries” after March.
The potential change in the government’s support package for business, which several officials said was under active discussion, would involve ditching plans to shift to targeted aid — partly because of the complexity of deciding which groups should benefit.
But the overall package would be set at a lower level than the current six- month-long business energy package, with a cost the government has estimated at £29bn. It is due to expire on March 20.
The discussions reflect wider fears that the energy crisis is set to continue well after the spring, with some analysts warning that next winter may prove an even tougher test for the UK’s infrastructure and businesses.
Craig Beaumont, chief of external affairs at the Federation of Small Businesses, said that without further government support next year, “a huge proportion of the business community will become unviable”.
According to FSB research, almost a quarter of small firms would shut down, sell, shrink or restructure unless help is extended beyond March.
In his Autumn Statement last month, Hunt said most businesses would not receive extra support after April, arguing that subsidising their costs was “not sustainable”. Instead, he said the government would offer “significantly lower” help — and only for the most vulnerable industries. By contrast he promised to keep all household bills capped until April 2024.
But business groups have kept up pressure on ministers to prolong the current regime, under which all employers have benefited from a state price cap on wholesale energy prices on electricity and gas at about half the expected market price.
Officials at the Department for Business, Energy and Industrial Strategy have been sympathetic to business leaders’ arguments that a targeted regime risks leaving out entire industries, with widespread job losses, according to people involved in the discussions. But the officials warned that the cost could become prohibitively high for the Treasury if subsidies were too great.
Officials have also found that attempts to reduce the support to specific sectors have proved overly complicated. Energy suppliers said the government had asked them for more details on customers to help tailor the business support scheme for those who most need it — but that they had come up with only limited information.
“We [suppliers] are not very skilled at granular data on users,” said one executive.
Continuing to provide universal aid would be significantly easier to administer than targeting such help, but spreading out support more widely would mean less help for each “vulnerable” company or industry.
One alternative under consideration is to continue with a low-level universal scheme while giving more support to vulnerable sectors such as energy-intensive industries.
The government has promised to give business certainty by the new year over how the system will function from April. Hunt told LBC this week the announcement would come “either just before or just after” Christmas.
People close to the negotiations insisted that no decision had yet been made.
“A review will consider how to support businesses from April 2023,” the Treasury said.