Treasury cuts energy bill subsidy package by 85%

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There will also be a more generous supply of energy-intensive industries such as steel, ceramics, paper, glass and cement.

Wholesale energy prices fell this week with the unusually hot weather and are expected to continue falling in the coming months, according to estimates used by the government.

But the future of wholesale prices is unpredictable, particularly given the uncertainty about developments in Ukraine, and there are concerns that energy companies will not pass the discounts on to customers.

Companies tend to be on fixed-term energy contracts, which means that any impact from the new subsidy scheme will affect companies when those contracts are renewed.

Kate Nicholls, chief executive of UK Hospitality, an industry body representing 100,000 pubs, pubs and restaurants, expressed concern about the change.

Ms Nicholls said: “Hospitality has been recognized by the government as a particularly vulnerable sector due to the effects of Covid lockdowns and rail disruptions due to strikes. This means we are more vulnerable than other sectors.

Half of our businesses are operating at or below break-even. For our members, energy bills have risen to become the defining cost of whether or not they are viable.

So any too rapid reduction in energy bill subsidies would be particularly harmful. We’ve been making this point to the Treasury for weeks.”

Other business figures have accepted that the amount of subsidies the Treasury is currently providing for capping energy bills cannot be sustained by the government in the long run.

A source in a leading business authority said: “This extension will help relieve many companies, especially small and medium-sized companies.

“The Energy Bill Relief Scheme has been a mainstay but it is unrealistic for it to continue to operate in its current form due to the cost.

“The big question now will be whether additional support will come to those industries that use heavy energy.”

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