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Energy uncertainty continues

12 January 2023

THE WEEK the government has announced a new Energy Bills Discount Scheme, ahead of the current scheme ending in March. The new scheme will mean all eligible UK businesses and other non-domestic energy users will receive a discount on high energy bills until 31 March 2024.

According to the government, this will help businesses locked into contracts signed before recent substantial falls in the wholesale price manage their costs and provide others with reassurance against the risk of prices rising again.

So far so good, or so it would seem. In reality, this will slash the government support given to companies with their energy bills, with some business groups warning that the flat-rate discount won't provide sufficient protection if energy prices spike again ahead of next winter. Chancellor Jeremy Hunt has described the current scheme as "unsustainably expensive", yet some in business are warning that the increased energy costs will have to be passed onto customers, further driving inflation. There also will undoubtedly be many companies that have to fold because they can no longer afford the price of energy.

This is a view borne out by the latest Make UK/PwC Senior Executive survey, which examines the views of over two hundred senior executives across manufacturing on the outlook for the year ahead. It is reported to show the scale of uncertainty and increased costs that companies continue to face across the board, not just on energy, with ongoing supply chain disruption, access to labour and increased transport costs creating a potent mix of challenges for companies.

According to the survey, almost three quarters of companies (70%) expect their energy costs to increase this year, with two thirds saying they still expect to take actions such as reducing production or cutting jobs despite the Government energy support package.

In addition, 60% of companies are increasingly concerned about blackouts affecting their business, almost two thirds of companies (64.3%) say increased energy costs are the biggest risk to their company, while more than two thirds (68.9%) say uncertainty around energy costs is the biggest risk to confidence.

Of course, any extension to the scheme is welcome, but unless the government provides similar levels of support to that seen in other comparable nations, the UK risks falling even further behind its competitors.

As Cara Haffey, manufacturing leader at PwC UK, says: "Given the scale of the cost challenges, and the backdrop of a long winter, it is imperative that the right balance is struck between keeping our collective eye on the ball in regards to our netzero commitments while ensuring vital support is given to ensure that the sector - as adaptable as it is - can withstand what is likely to be a difficult year ahead.”

Charlotte Stonestreet

Editor

 
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