Britain eases pressure on business by halving energy bills this winter

Sheep graze under a row of electric pylons near Ellesmere Port, Britain, October 11, 2021. Reuters/Phil Noble/

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  • Bulk electricity, gas bills to be limited from October
  • level will be less than half of current market prices
  • Government says the deal will stop the collapse of companies

LONDON, Sep 21 (Reuters) – The British government said on Wednesday that it will reduce the cost of wholesale electricity and gas for businesses to less than half the market rate from next month, helping to relieve pressure from rising energy costs. It will help, but the expenditure of the government is increasing rapidly.

The wholesale price would be around £211 ($239) per megawatt hour (MWh) for electricity and £75 per MWh for gas, compared to predicted market rates of £600 and £180, respectively. read more

“We have taken steps to prevent businesses from collapsing, protect jobs and limit inflation,” Finance Minister Quasi Quarteng said.

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Wholesale gas and electricity prices in Europe soared after Russia invaded Ukraine, and have remained volatile ever since. Final unit prices for the plan will be confirmed on September 30.

Groups representing businesses ranging from pubs to steel makers welcomed the intervention, saying the government had thrown a lifeline for companies struggling to survive. read more

The government did not publish an estimate of the cost, but the City estimated £25bn-30bn over the next six months and other reports put the price at £42bn. It comes on top of more than £100 billion for a previously announced scheme to help families. read more

Trade Minister Jacob Rees-Mogg said, “The difficulty with giving a cost figure is that it will depend on where the price of energy goes in the winter, and it’s very difficult to predict, so I can’t give you the full cost.” “

“It will undoubtedly be in the billions of pounds,” he said. read more

A spokeswoman for Prime Minister Liz Truss said Quarteng’s financial event will outline estimates for the cost of the support package for businesses and households.

critical test

After weeks of political stagnation, as conservatives elect a new leader and the country mourns the death of Queen Elizabeth, this week the government is making a series of announcements aimed at averting an imminent economic crisis.

On Friday, Quarteng is expected to set out some details on how it will pay for the energy plan, as well as fulfilling its promise to cut taxes, although the total cost of the energy plan will depend on market prices in the coming months. .

Investors say Friday’s statement will be a significant test of confidence in British public finances. Borrowing costs are rising at the same time that the government is committed to spending more, and ministers are counting on accelerated economic growth to keep the bill from spiraling out of control. read more

Quarteng said on Wednesday he had promised to reduce debt in the medium term, but it was “perfect” to help families and businesses in the event of a major economic shock.

The Commercial Energy Scheme will initially apply from October 1 to March 31, 2023 for all non-domestic energy users, including charities and the public sector such as schools and hospitals, as well as businesses. read more

The scheme initially provides immediate assistance to all institutions that may need it, but is expected to reduce in March to those who need it the most.

“We’re going to review it after six months. We’ll make sure that even the most vulnerable businesses like pubs, like shops, continue to be supported after that,” Truss told broadcasters.

The government announced the same level of support for homes in Northern Ireland as the rest of the United Kingdom with a similar plan, which is in effect from November, but back in early October.

The plan was heavily criticized by most political parties in the region, who said an additional £100 payment to households unable to obtain support through a price cap because they use alternative fuels such as heating oil was insufficient.

According to the Consumer Council of Northern Ireland, more than two-thirds of Northern Ireland households use oil boilers as their main source of heating, the largest percentage in Western Europe.

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Reporting by Paul Sandle, William James, Alistair Smout, David Milliken and Kylie McClellan, additional reporting by Paedric Halpin in Dublin and Amanda Ferguson in Belfast; Editing by Mark Heinrich, Angus McSwan and Mark Porter

Our Standards: Thomson Reuters Trust Principals.

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