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UK unveils $45-billion energy bill bailout for businesses in Europe

"We'll ensure the most vulnerable businesses continue to be supported after that," said British PM Liz Truss

Europe | Russia Ukraine Conflict | UK Prime Minister


UK PM Liz truss
The cap for businesses is set at 21.1 pence per kilowatt-hour for electricity and 7.5 pence for gas, the government confirmed

The British government unveiled a multibillion -pound bailout to help companies with their energy bills this winter amid soaring prices that threaten to put many out of business.

Under the estimated £40 billion ($45 billion) plan, announced in a statement, the government will cap the wholesale energy prices that feed into gas and power contracts for businesses for six months. Thereafter, a review will determine whether ongoing support is needed for specific sectors.

The cap for businesses is set at 21.1 pence per kilowatt-hour for electricity and 7.5 pence for gas, the government confirmed, after Bloomberg News reported the numbers. That would impose a discount of roughly 50 per cent on the current wholesale prices this winter, but the markets remain volatile, and the exact discount for each business depends on when it signed a contract.

The government is trying to shield companies from the worst effects of energy prices that have soared since Russia squeezed pipeline flows to after being sanctioned over its invasion of Ukraine.

Documents seen by Bloomberg two weeks ago estimated the package may cost from $20.81 bn to $41.62 bn over six months. It is separate from a $128.83 bn plan to help households with their energy bills.

“There’s a very real danger, before we put in place our business scheme, that cafes, pubs and shops could go out of business, and we simply couldn’t allow that to happen,” Prime Minister Liz Truss told reporters.

“That’s why it is right for the government to take the steps that we’ve taken.” Many small businesses have shut in the face of seismic jumps in their bills.

Under the new plans, businesses that have signed fixed contracts since April 1 will have their rates retroactively discounted to equalize the price per unit of energy. Companies on variable rates and large users on flexible contracts that decide when to hedge their energy also will be eligible for support, subject to a maximum discount.

All businesses, regardless of size, will be eligible for the subsidy. That may cover some of the nation’s biggest companies — such as gas producers and banks — alongside pubs, cafes and small retailers.

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

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First Published: Wed, September 21 2022. 23:37 IST