Energy prices: Lancashire welcomes news of six-month price cap to "stop businesses collapsing"

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News that the Government is stepping in to protect businesses from soaring energy prices has been cautiously welcomed in Lancashire.

Today Chancellor Kwasi Kwarteng announced the wholesale cost of gas and electricity will be slashed for companies under a scheme which will run for six months starting in October.

The Government will cap the wholesale price paid by non-domestic customers, which include schools and charities.

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Groups representing businesses in Lancashire said the move was "significant", but called for robust measures to make sure businesses don't miss out, and much longer-term planning to make sure the economy is stable.

Kwasi Kwarteng said the Government has acted to ‘stop businesses collapsing’ (Kirsty O’Connor/PA)Kwasi Kwarteng said the Government has acted to ‘stop businesses collapsing’ (Kirsty O’Connor/PA)
Kwasi Kwarteng said the Government has acted to ‘stop businesses collapsing’ (Kirsty O’Connor/PA)

Local businesses said "any help is welcome", but awaited more information on what the package meant to them.

What is the "supported" price?

The “supported wholesale price” is expected to be £211 per megawatt hour (MWh) for electricity and £75 per MWh for gas.

This is around half the expected wholesale price on the open market, and equivalent to the cap on household energy bills that will be set this October and run for two years.

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Babs Murphy Chief Executive of the North & Western Lancashire Chamber of CommerceBabs Murphy Chief Executive of the North & Western Lancashire Chamber of Commerce
Babs Murphy Chief Executive of the North & Western Lancashire Chamber of Commerce

>>>Click here for what Liz Truss has promised on household energy bills

The support a business receives will depend on what kind of contract it has with its energy supplier.

Organisations which signed fixed-price energy deals on or before April 1 this year will see the wholesale part of their bill capped automatically. Those who entered new fixed-price contracts after October 1 will get the same support.

Companies on default, deemed or variable tariffs will be given a per-unit discount, but the amount of support they can get is limited.

Kelvin BardsleyKelvin Bardsley
Kelvin Bardsley

This means that if the price on wholesale gas and electricity markets keeps soaring, their bills will go beyond those on fixed-price deals.

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The Government said it is working with suppliers to ensure they offer businesses the opportunity to switch to a fixed contract.

"Stop businesses collapsing"

Mr Kwarteng said: “We have stepped in to stop businesses collapsing, protect jobs and limit inflation.

“And with our plans to boost home-grown energy supply, we will bring security to the sector, growth to the economy and secure a better deal for consumers.”

Local reaction

Kelvin Bardsley, who runs The Kitchen Tap in Garstang, said he wanted to know more about how individual businesses would benefit, but welcomed the news.

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He said: "I think any help is good news. I don't think anyone will grumble too much about this, but I will need to read up on what it means for us."

Mr Bardsley is hopeful for a good autumn and winter period, and hopes to see a return to more Christmas parties than in recent years, due to Covid.

He said: "We're looking forward to a good winter, especially now that there is help with the energy bills.

"Hopefully businesses will treat their staff and we will see Christmas parties, but we will wait and see. There is a cost of living crisis, and we don't know how that will affect things."

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Chamber of Trade

Babs Murphy, Chief Executive of the North and Western Lancashire Chamber of Commerce, which covers both the Preston and Blackpool areas, said: “For months we have been calling for Government intervention to help businesses with eye watering energy bills. This support package is significant and will ease the cost pressures that have been piling up on businesses. 

“It will allow many firms that were facing closure, or having to lay off staff or reduce output, to keep going through the winter. 

“But the exact level of support will vary greatly from business to business depending on the detail of its contract, so some will inevitably do better than others.

“We now need action to get this saving passed onto business as soon as possible – every day will put some firms closer to the edge and they cannot hang on much longer. 

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“There must also be effective legal oversight to ensure no firms that are due this money miss out. 

“For those that will benefit, six months support is not enough to make plans for the future.

“We understand there are a range of unknowns for the Government in looking ahead, but without further reassurance very few firms will make plans to invest or grow.  

“Some businesses will still struggle to meet their bills despite this government intervention, the Chancellor must prioritise those firms in his mini-budget on Friday. 

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“There are a range of other challenges that must be addressed including labour shortages, supply chain disruption, and rising raw material costs. 

“To truly revitalise our economy for the difficult months ahead then there must be a clear long-term plan that gives business the confidence to grow.”

Federation of Small Businesses

Tina McKenzie, Policy and Advocacy Chair of the Blackpool-based Federation of Small Businesses (FSB) said: "This is a substantial move and will likely be of considerable help to small firms which have been crying out for months for measures to limit the pain caused by spiralling energy prices.

"Today’s announcement will give certainty for the next six months, but a tough year remains ahead of many small firms.

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“Many have been waiting for details on the energy bills support package to plan confidently for the winter and beyond, so it’s encouraging to have the clarity from Government on the form that its support will take. The next stage will be for small businesses to learn what the changes mean for their current contracts and for any offers they have been looking at, but waiting to decide what to do."

Hardship fund

She called for a hardship fund for those who fall outside of the current support, and also urged energy providers to pass on the benefit of the freeze in full, and immediately provide updated bills and quotes to each small business customer who will be wondering what the changes mean for them.