Cost of living energy bills plan: What support is available for businesses?

Editor’s note: On 21 September 2022, the government announced the Energy Bill Relief Scheme, which supersedes the Energy Price Guarantee.

We cover the details in this article: Energy Bill Relief Scheme: Answers to questions on the support for businesses.

Although much of the cost of living crisis focus has been on households, businesses face almost identical struggles.

Sky-rocketing energy bills in particular are presenting challenges.

The government says energy costs have been rising by more than 500% for businesses, while research from the Confederation of British Industry (CBI) published in August 2022 reports nearly two-thirds of businesses (69%) expect energy costs to increase in the next three months. Almost a third of businesses anticipate rises of more than 30%.

There was some good news on 8 September 2022, however, when the government announced what is effectively a new type of energy price cap to tackle the cost of living crisis.

The measure also extends to business energy bills for a short period.

Furthermore, the day before this was announced, new Prime Minister Liz Truss confirmed that the recently applied National Insurance increase would be halted and implied the forthcoming Corporation Tax increases would be abandoned, too.

Here’s everything we know so far.

(It’s very likely there will be a mini-budget in the coming weeks, providing specific details, in which case we’ll update this blog accordingly.)

Here’s what we cover:

• Energy Price Guarantee (EPG) for businesses
• Suspension of green levies
• Do businesses get a £400 energy bill reduction?
• Are some tax increases to be reversed?
• 5 tips for businesses worried about energy bills
• Final thoughts

Energy Price Guarantee (EPG) for businesses

On 8 September 2022, the UK government announced the Energy Price Guarantee (EPG). This has been agreed with energy suppliers.

The EPG is a form of energy cap that supersedes the existing Ofgem price cap. It’s applied automatically to bills.

Crucially, the EPG applies also to businesses, whereas the Ofgem price cap has never done so.

The EPG also applies to all non-domestic users, such as charities, schools and hospitals.

As its name suggests, EPG is a guarantee on the maximum cost of a unit of gas or electricity. While this guarantee level hasn’t been revealed yet, the government says it will mean the average household pays no more than £2,500 per year.

It hasn’t yet provided illustrative figures for businesses.

On 14 September 2022, the government said the EPG will apply to business energy bills as of October 2022. If the EPG scheme is not up and running at that point, businesses will be able to backdate claims under the EPG.

It’s not yet clear how this will work.

There are some crucial differences compared with how the EPG is applied to businesses, when compared to households:

• While the EPG applies to households for the next two years, it only applies to businesses for six months (from October 2022 to March 2023). This is to help businesses get across the 2022 winter months.
• What the government calls “vulnerable sectors” will get more help after the six months have ended (in February/March 2023). While making the announcement, the Prime Minister mentioned that hospitality is one such vulnerable sector, singling out pubs as an example. She also said more details of which kinds of businesses are considered vulnerable and will therefore get further EPG support will be available within three months, following consultation.

Suspension of green levies

The EPG involves a temporary suspension of green levies, which comprise a typically unnoticed component of energy bills. The government will pay these levies in lieu of households.

There are several similar environmental taxes, reliefs and schemes applied businesses, such as the Climate Change Levy (CCL).

However, it appears the green levy suspension only applies to households bills.

Do businesses get a £400 energy bill reduction?

All households across the UK will get a £400 total reduction in their energy bills at the end of 2022 and into 2023. This is known as the Energy Bills Support Scheme.

Payments are spread over six months, beginning in October 2022.

The Energy Bills Support Scheme doesn’t apply to business energy use, so businesses don’t receive this help.

Note that if you work from home in any capacity, there’s no need to use a business energy supplier and you can use your domestic energy supplier. This effectively means the Energy Bills Support Scheme applies partly to home working.

Are some tax increases to be reversed?

In her first Prime Minister’s Questions on 7 September 2022, the Prime Minister seemingly confirmed the reversal of two tax rises, saying: “…we will reverse the National Insurance increase, and that is why we will keep corporation tax low…”

These had been promised during her leadership campaign.

It implies the following, pending official confirmation from HMRC or the government:

• The National Insurance rate increases introduced earlier in 2022 will be reversed.
• The planned corporation tax increase in April 2023 will no longer go ahead.

The National Insurance increase has applied from April 2022. It saw National Insurance contributions (NICs) for both employer and employee increase by 1.25%, making for a 1.5% total increase in wage bills for employers.

The intention is this is followed by a new Health and Social Care Levy from April 2023 onwards, with the same deductions although with slightly different criteria compared to NICs.

It’s unclear if the HSC Levy will still go ahead for either employers and employees.

Corporation tax had been set to increase to up to 25%, depending on new profits thresholds, with a tapered rate for smaller businesses.

Again, it seems this will now be cancelled, but we await confirmation of what will take its place, or if the existing rates will remain in place.

5 tips for businesses worried about energy bills

Businesses concerned about energy bills have a number of options.

Before you start, work out your current usage. Grab some old bills and work out how many kilowatt hours (kWh) of gas and electricity your business uses across a year. This is important because it can affect the outcome of the following suggestions.

1. Prepare your business cash flow for the end of any fixed deal

Fixed rates are rarer in the business world compared to domestic settings. But if you’re on a fixed deal that ends soon, prepare your cash flow well ahead of time.

If you’ve been on the fixed contract for more 12 months or more, it’s very unlikely you’ll find a deal that’s anywhere near as inexpensive.

Use your usage calculations to project your monthly bills following the end of your fixed deal and ensure you have the cash ready to pay those bills.

2. Find a good fixed deal

As with fixed deals for domestic customers, you’re unlikely to find any deal right now that’s much better than staying on a supplier’s variable rate and riding out the rises in prices (or potential falls).

Energy comparison sites often include sections for business users, so head over to the same sites you may already use to find the best deals.

3. Are you running a microbusiness?

When it comes to energy use, there’s a special category of business identified by Ofgem, known as a microbusiness.

Special billing rules apply that can be advantageous if used cleverly. Energy contracts can’t last more than 12 months, for example, and the maximum notice period to end a microbusiness contract is 30 days.

Energy suppliers have a duty to identify if yours is a microbusiness but the criteria are that it employs fewer than 10 people, or only uses up to 100,000kWh of electricity, or only uses or up to 293,000 kWh of gas.

4. Implement energy saving measures

You can apply the same energy-saving measures to your business as you apply to a household—everything from cavity wall insulation, to energy-saving lightbulbs.

You might wish to look at how employees use energy, too, outside of necessary work activities.

For example, providing a fridge in a break room may consume significant energy.

You may need to think creatively.

Filter coffee makers consume energy over the space of several hours, for example, in order to keep the coffee warm. Providing a jar of instant coffee means a kettle need only be boiled for a minute or two. As the former Prime Minister suggested, you may wish to invest in a more energy-efficient kettle, too.

Lights might be turned on unnecessarily during the daytime, or accidentally left on overnight.

Rather than impose such policies on employees, empower them by putting the question of energy saving to the workforce and seeking suggestions.

You might turn this into a reward scheme, with gifts presented for the best ideas. Employees are more likely to follow such schemes if the ideas originated between them.

5. Find energy schemes, grants or even loans for business

The government is keen to encourage sustainable energy use within businesses and has a number of schemes, grants and loans for this purpose.

To find them, you can search the government’s dedicated business support search service.

Examples include support for low-carbon workplaces, although you may find your location is a determining factor, with regional bodies administering some of the schemes. You can also contact your council to see if any local schemes are available.

Final thoughts

The EPG measures along with tax reductions are sure to be greeted warmly (pun intended…) by businesses concerned about energy bills.

However, keeping bills low is going to require a proactive mindset as the coming months and even years roll by.

A smart business is one that’s always looking at energy usage and expenditure, and is making efforts to reduce bills—regardless of how much each kWh costs.

Editor’s note: This article was first published on 8 September 2022 and has been updated for relevance.