Government cuts energy bills for Pubs and UK businesses

What does the energy bill relief scheme mean for pubs and nightlife businesses?

New support has been unveiled for businesses facing rising energy bills. Through a new government Energy Bill Relief Scheme, the government will provide a discount on wholesale gas and electricity prices for all non-domestic customers who are struggling under inflation. Discounts will be applied to energy usage initially between 1 October 2022 and 31 March 2023.

How much will my business save through the Energy Bill Relief Scheme?

To calculate your discount, the estimated wholesale portion of the unit price you would be paying this winter will be compared to a baseline government supported price which is lower than currently expected wholesale prices this winter.

Prime minister Liz Truss specifically named pubs among those businesses. The Government report also specifically uses a pub as the example, providing this circumstance:

A pub uses 4 MWh of electricity and 16 MWh of gas a month. They signed a fixed contract in August 2022, giving them a current monthly energy bill of about £7,000. At the time they signed their contact, wholesale prices for the next 6 months were expected to be higher than the government supported price of £211/MWh for electricity, and £75/MWh for gas, meaning they can receive support under this scheme.

The difference between expected wholesale prices when they signed their contract and the government supported price is worth £380/MWh for electricity and £100/MWh for gas, meaning they receive a discount of £3,100 per month, reducing their bill by over 40%.

Businesses on variable contract receiving the maximum discount could half their current spend. Also, businesses do not need to contact suppliers as the measures will be automatically applied.

UK Hospitality chief executive Kate Nicholls OBE said:

“We are relieved that the government has listened to the representations that UKHospitality has stridently delivered, relating to the problems that the sector is experiencing with energy suppliers. This intervention is unprecedented and extremely appreciated as we head into an uncertain winter with numerous challenges on many fronts. The inclusiveness of the supports announced today – covering businesses small and large – will be extremely beneficial to the sector. A sector that provides a huge number of jobs, many of which are now more secure. The government – and the prime minister herself, in her comments in New York – has singled out the vulnerability that energy costs are inflicting on the hospitality sector. 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. 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.”

Further measures have been requested, and a review into the operation of the scheme will be done in 3 months’ time. This will inform decisions on future support after March 2023. At NDML we believe this is a step in the right direction, however more still needs to be done.

As Michael Kill from the NTIA states:

“We welcome the detail of the long-awaited announcement. However we remain concerned that this measure to cap the wholesale price to energy supply companies may not result in sufficient relief being extended to business customers, given that energy suppliers remain free to impose additional mark-ups such as network charges and operating costs, which are uncapped. The net result of this could be a position where small businesses are still being asked to pay unaffordable energy bills of several hundred percent more than in previous years, which is clearly not sustainable. While we acknowledge that it will take some time for details and final pricing to businesses to become clearer, we also note this proposal will exclude businesses that renewed before 1 April where energy costs were still untenable, and does nothing to alleviate the high levels of energy supply debt incurred by businesses exposed to uncapped pricing over the last few quarters, and in isolation is unlikely to be enough to ensure businesses have the financial headroom to survive this winter. If we are to ensure the survival of our sector it remains imperative that the short term relief announced today is extended to 12 months and followed up with further action by the government in the budget this Friday, and that such action must incorporate our core asks, specifically business rates relief and a reduction in VAT across the board. We will now have to wait for the announcement on Friday from the chancellor on further support, however, we must note that the measures being discussed to date such as corporation tax relief will simply not be sufficient, given only one in four hospitality businesses would currently benefit from such measures, as three out of four are not trading profitably.”

At NDML it’s own mission to safeguard nightlife venues at every turn. To stay financially protected and for an insurance check-up, contact us today.