10:49 am, September 21, 2022
The government has announced that it will foot the bill for nearly half of car dealers’ soaring energy bills in oder to protect them from going bust.
The wholesale cost of gas and electricity will be slashed for UK businesses 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 also include schools and charities.
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.
Chancellor Kwasi 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.’
Reacting to the news, Mike Hawes, SMMT Chief Executive, said: ‘The new business secretary has given thousands of automotive companies vital breathing space, helping keep their operations viable this winter.
‘This is a short-term fix, however, and to avoid a cliff-edge in six months’ time, it must be backed by a full package of measures that will sustain the sector.
‘Manufacturers have consistently invested to drive down energy use but it remains one of their biggest costs, threatening competitiveness and viability.
‘Government must now seize this opportunity to deliver a long-term, affordable and secure supply of low carbon energy to ensure the industry is globally competitive and can deliver the jobs, economic growth and net zero gains the UK needs.’
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.
This means that if the price on wholesale gas and electricity markets keeps soaring, their bills will go beyond those on fixed-price deals.
The government said it is working with suppliers to ensure they offer businesses the opportunity to switch to a fixed contract.
The level of support offered to companies with flexible purchase contracts, which include some of the biggest energy users, will also be capped, the government said.
The announcement comes after strong calls from those in the automotive industry for additional help.
Speaking last month, Nathan Tomlinson, dealer principal at Devonshire Motors, told Car Dealer: ‘I know it can be a reckless attitude to simply push problems on to the government.
‘But without a significant amount of support, I don’t see anything other than a very difficult winter for many – and that unfortunately coincides with the time of year when people struggle the most.’
Jamie Caple, boss of Derby-based Car Quay added: ‘I think the measures in place to protect normal people in homes, such as price caps, should perhaps also extend to companies, too.
‘Support for businesses where needed is great as we generate huge tax revenues and also employ lots of people.
‘We shouldn’t be propped up, as I feel it isn’t healthy for an economy to allow businesses that don’t work to survive financially, but perhaps reducing our corporation tax burden would be a nice gesture to help soften the blow of rapidly increasing costs.’
Companies that are not connected to either the gas or electricity grid will get some kind of equivalent support, although details will be announced later.
The support scheme will last for six months, with a review period halfway through.
The government will try to decide how to continue supporting the most vulnerable businesses after the scheme ends.
