Prime Minister Liz Truss has announced moves to cap business energy bills for six months to avoid companies going to the wall in the winter.
The PM said the financial support would be “equivalent” to the Treasury’s support announced today for consumers, which will see household bills capped at £2,500 a year.
However, there remain questions over how much the support will cost, where the funding will come from and how it will be distributed.
Truss said new business secretary Jacob Rees-Mogg would lead a consultation with businesses which would be completed within the next three months, to provide companies with certainty.
Beyond the six months, support would focus on “vulnerable industries”, with Truss naming hospitality as one of those the government would seek to protect, and food production not mentioned
The PM’s intervention comes with confidence among food firms at its lowest-ever ebb, according to the latest FDF survey, and warnings thousands of companies could go bust before Christmas.
The typical energy bills faced by food suppliers are said to be rising by 300%-400%, but in some cases are much higher.
Earlier this week a raft of trade bodies wrote an open letter to the government calling for “urgent action” to mitigate the cost of crippling industry energy bills, or see thousands of small and medium-sized companies collapse.
Earlier today, Cold Chain Federation president Tim Moran said the government had been too focused on consumer energy costs.
“The cold chain is being buffeted on all sides by the inflation crisis. Keeping food cold is energy-intensive in its very nature, and the cost of electricity for cold storage has at least doubled already and is going higher.
“It has been short-sighted of government to think only about the direct cost of energy to domestic consumers: an energy price cap for food industry businesses is essential to tackling food price inflation.”
Truss said: “I know business and families are very concerned about how they will get through this winter. That’s why I felt it was important to act urgently.”
She added: “This is part of my vision for rebuilding our economy”, claiming that energy supply had been “ignored for too long”.
She has also ruled out a windfall tax on energy companies to pay for the move, which she said would save the average household £1,000 a year.
Labour leader Keir Starmer attacked the government for refusing to use a windfall tax to finance the support, saying energy companies were set to make £170bn in unexpected profits in the next two years because of the energy crisis.
Industry bodies welcomed the announcement but called for clarity on how the intervention would work.
“We welcome the support the Prime Minister announced today to help households and businesses deal with soaring energy bills,” said FDF CEO Karen Betts.
“Our sector is looking forward to urgent conversations with the Business Secretary to understand what support will be available to hard-pressed food and drink manufacturers, not least smaller businesses, given our role in ensuring an uninterrupted supply of high quality and affordable food and drink to everyone across the UK every day.”
PTF director general Rod Addy said: “The devil is in the detail. Provisions for businesses at this stage are vague. Six month’s support on energy prices is welcome, although problems are likely to persist beyond six months.
“There is a concern that the food industry may be left out of any long-term provisions and queries around which sectors are included in the term ‘energy intensive’. The food industry should certainly be seen as an energy sensitive sector even if it’s not as energy intensive as, say, steel.
“There is a concern around cash flow, in that businesses are being presented with, in some cases, 900% increases in new energy price contracts with very little notice. All such cost increases can be managed given sufficient timescales, but these costs, on top of costs for anything else that goes wrong in the supply chain, mean businesses may not be able to lay their hands on additional cash fast enough.
“Food businesses are not just concerned about the costs but also whether energy rationing may be coming down the line. Clearly this could potentially disrupt production and supply.”
BFFF CEO Rupert Ashby said: “I am pleased to see that Liz Truss has recognised the plight of many of our members. However, we need to see the detail of the scheme to understand the full level of support being offered. My immediate reaction is that I would like to see the scheme extended to two years to match the support being offered to households.”
BBPA CEO Emma McClarkin said: “By committing to an energy price cap for businesses today the PM has shown she understands just how critical the energy crisis has become for our breweries and pubs, and just how important pubs and brewers are to their communities.
“This intervention will help thousands of business owners breathe a little easier over energy bills in the coming winter months.
“This announcement will avert the immediate threat of the energy crisis for businesses, but we need clarity and assurance for the long-term so our brewers and pubs can plan effectively and thrive at the heart of their communities long into the future.
“The cost of doing business is still a very real threat for many but we are encouraged by the direction this government is going in. Now we need to hear more on business rates, VAT and keeping beer duty low.”
Mick Howard, CEO of soft drinks manufacturer Clearly Drinks, said: “The PM’s statement on the decision to freeze energy bills and provide a six-month scheme for businesses is one that is welcomed as a starting point to help companies across the UK.
“Unlike larger organisations that can absorb the costs, the rises are hitting smaller UK businesses the hardest and support is long overdue.
“Not only that, but it is also affecting businesses right through the supply chain, which means costs are going up on all materials and packaging which is further impacting the bottom line.
“While it’s expected that the scheme will be reviewed for vulnerable industries, we hope the new measures announced today will help take some of the pressure off small businesses and will reassure us all that we can start to feel positive for the future again.
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