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UK businesses to see energy bills soar as government cuts subsidy to firms by 85%

Tuesday, 10 January 2023 7:30 AM [ Last Update: Tuesday, 10 January 2023 7:31 AM ]

People walk along a busy shopping street, during the traditional Boxing Day sales in London, Britain, December 26, 2022. (Photo by Reuters)

The UK government is set to scrap the energy subsidies for businesses in the next financial year by 85 percent, leaving small businesses in a dire economic situation, as the cost-of-living crisis squeezes Britons’ lives.

British businesses will see their energy bills soar from April after the government announced the stoppage of the current bills support scheme for firms at the end of March when the price caps for energy bills will expire.

Describing the current level of support as "unsustainably expensive", the government has decided to reduce the support rate from £18bn to £5.5bn in the planned six-month period.

Speaking to the House of Commons on Monday, Treasury Minister James Cartlidge was at pains to confirm that: “It is not sustainable for the exchequer to continue to support large numbers of businesses at the current level.”

“No responsible, serious government anywhere in the world can permanently shield businesses from this energy price shock,” Cartlidge said, acknowledging the soaring energy costs across the country.

Cartlidge also insisted it was necessary to “cap the taxpayer’s exposure to volatile energy prices” rather than providing open-ended support.

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According to the government’s own calculations, a typical pub will see its bills rise by almost £3,000 a month when the new scheme takes effect, while a small shop would pay more than £450 a month, as an increase to its energy bills.

As Prime Minister Rishi Sunak is trying to restore fiscal credibility following the economic shock across the country, manufacturers say they may need to cut jobs and production due to rising energy costs.

Martin McTague, national chair of the Federation of Small Businesses, criticized the government’s new plan and said the reduction in help is a “huge disappointment”.

“This is so out of touch,” McTague said in an e-mailed statement. “The government will inevitably have to come back.”

The cost-of-living crisis across the UK has brought the industries and labor forces under intense pressure, prompting tens of industrial actions over payment disputes each month.

Moreover, the worst impact of the cost-of-living crisis is yet to hit the already struggling Britons, a leading think tank has said, warning that families across the UK have only experienced half of the lost income they are expected to suffer during 2023.

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