We are all a little wiser about how the gas and electricity markets work now than we were 12 months ago. Fortunately the government has been helping businesses and households weather the storm of incredibly high energy bills, but it is costing the taxpayer, just on the business support alone, a forecast £18.4 billion in six months!
Despite wholesale prices now at a level that is lower than the level they were when Russia invaded Ukraine, they are still 3-4 times higher than the long term average, and because of the way energy companies hedge, it will take some time to see prices come down in real terms.
So whilst this gives businesses some confirmation of the support for the remainder of 2023, it won't remove the huge impact the energy crisis has had on businesses or, ultimately, consumers and UK inflation.
The government will scale back support for businesses with energy bills after warning that the current level of help was too expensive. Under the new scheme, firms will get a discount on wholesale prices rather than costs being capped as under the current one. Heavy energy-using sectors, like glass, ceramics and steelmakers, will get a larger discount than others. But firms will only benefit from the scheme when energy bills are high. While some industry groups welcomed the announcement, others warned it fell short for business struggling with soaring costs. The new scheme will run until the end of March 2024, while a limit has been set on it in a bid to reduce how much taxpayers are exposed to spiralling costs.
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