Six months is not long enough for business gas bill cap from government

No one could say the £150bn earmarked by the new government to help consumers and businesses facing soaring gas and electricity bills is too little. But for some it will definitely be too late, with two suppliers – Hesper and Jupiter – going under this week following the demise of wholesaler Tree of Life, while retailer Oops has closed eight of its nine stores.

The government is promising to “deliver” via an immediate energy bailout. And not a moment too soon as, in the midst of a crisis worse than Covid, the Conservative Party leadership election has agonisingly played out, while a disgraced outgoing prime minister goes on a testimonial tour taking in Ukraine, a Greek island, Daylesford Organic – and a jolly in a jet.

And the death of Queen Elizabeth II this week threatens to further delay the bailout businesses urgently need.

In the meantime, details of how the long overdue support might work remain incredibly sketchy. And the situation is particularly worrying for suppliers who’ve already ‘fixed’ prices. What will happen to companies like Pan’artisan, who opted to fix for four years, at four times the previous level, to avoid a five-fold increase?

But even without a fix, prices on which the cap will then be applied are at historically high levels already, unaffordably so for many businesses.

And then there’s the timescales. New chancellor Kwasi Kwarteng insisted that “millions of families and businesses across the country can now breathe a massive sigh of relief, safe in the knowledge that the government is standing behind them this winter and next.” 

Not so. For while it’s reassuring the next six months are somewhat covered, for businesses, unlike consumers, it could only be six months.

In three months, the new prime minister will ask new business secretary Jacob Rees Mogg to review how it’s all going, with a plan to target businesses “most in need” for continued support, with Liz Truss name-checking the hospitality sector as an obvious case. Which indeed it is, with UK Hospitality research showing energy bills, up 238% on average, are now the second largest business cost for its members, and higher than rent and rates combined.

But what about the tens of thousands of suppliers to the hospitality sector? As we saw in the pandemic, the government’s application of support was blunt to say the least, with wholesalers denied business rates relief for months on end, while supermarkets were forced to hand it back or faced opprobrium if they did not, regardless of the pain they endured or the business decisions they had made in good faith.

How will Rees-Mogg decide the most deserving cases? If it’s on the basis of who can afford it, the likes of Tesco and Warburtons might well be excluded, despite the enormous costs they’re facing into. But that hardly seems fair when the new government is going out of its way not to introduce a windfall tax on energy giants set to rake in £170bn of unexpected profits in the next two years.