Background
The UK government took decisive action to support UK businesses and other non-domestic energy users, including charities and public sector organisations, through the EBRS. This scheme ensured businesses were protected from soaring energy costs and provided them with the certainty they needed to plan this winter.
The scheme was implemented for six months, with the government committing to a review of future support beyond 31 March 2023.
HM Treasury review
On 17 October 2022, the Chancellor announced that the review would be led by HM Treasury, with the objective of:
› Significantly reducing the overall burden on the taxpayer/public finances, considering the government’s commitment to fiscal responsibility and the need to ensure value for money.
› Ensuring support is targeted at those most in need and unable to adjust or absorb recent energy price rises without creating a category of businesses that rely on indefinite state support.
› Ensuring any support provided is consistent with businesses being incentivised to increase the efficiency of their energy consumption.
The work of the review will be focused on the following areas:
› The effectiveness of the scheme in supporting vulnerable non-domestic customers.
› Which groups of non-domestic customers (by sector, size, geography, or other factors) remain particularly vulnerable to energy price rises, considering the latest price position and forward curves, alongside other cost pressures.
› What barriers exist to these businesses absorbing increased energy costs or passing them through, and their ability to take steps to adjust to higher prices.
› An assessment of wider factors, including any support’s economic and public policy rationale.
› The most appropriate mechanism to support these customers – whether extending the existing scheme for some users or replacing it with a different scheme.
Throughout its work, the review will consider prevailing economic conditions and the anticipated costs of support; evidence from businesses, suppliers, and market experts, which the BEIS is collating; as well as wider international evidence and lessons learned from interventions being made in neighbouring countries
Public sector organisations will not be eligible for support through the review. The review will, however, consider private sector firms that are providers of public services and voluntary sector organisations such as charities.
Review findings and decisions on continued support for businesses will be announced by 31 December 2022.
Things to consider
Open-ended exposure of the public finances energy price volatility has implications for fiscal sustainability. Government support for large numbers of businesses is not sustainable, which the government recognises.
It seems that highly exposed businesses and those unable to pass through or absorb costs sufficiently may continue to require support beyond March 2023. However, the overall scale of government support is likely to be significantly lower and much more targeted. There will also be a very high bar for firms to reach to receive continued support.
Businesses should use the significant support provided over the initial six months of the scheme to identify measures that protect themselves from the impact of high energy costs. This should include improving energy efficiency and adapting operating models to a higher energy price environment where possible.
If you’d like to discuss any of the above with our team, get in touch via our website contact page ›
