Energy bill: Farms and bakeries consider closing after government confirms plans to cut subsidies

Businesses, including farmers and bakers, are planning to reduce or shut down their operations entirely after the government confirmed plans to cut the energy bill support package from March this year.

Business owners fear that his replacement, unveiled by Chancellor Jeremy Hunt on Monday, will not go far enough to protect them from volatile energy markets, meaning some are now considering waiving leases or laying off staff.

The new support package – the Electricity Bill Discount Scheme – will run until the end of March 2024 and the government will cut electricity bills for businesses to £6.97 per megawatt hour (MWh) for gas and £19.61 per MWh for electricity.

Industries identified as the most energy intensive, especially manufacturing, were offered large discounts.

It differs from this winter’s subsidy scheme, which sets a maximum amount that companies can pay for energy.

However, Mr. Hunt called the program “unacceptably expensive”. It is estimated to cost taxpayers £18.4bn over six months, while the new scheme is expected to cost £5.5bn over the year.

Charlie Brown, a farmer in Bury St Edmunds, said cutting state aid would “wipe out the profits” he makes on his 4,000-acre farm, which mainly grows potatoes and onions.

Mr Brown signed a new fixed-term contract last summer that increased his annual electricity bill to £900,000 from £178,000 a year.

He said the government’s current support program has helped “tremendously,” cutting his electricity bill by about 50 percent. He’s not sure exactly how much he’ll save under the new scheme, but he’s worried about cuts in aid.

“We think long and hard about the crops we grow and how we can survive in the future,” he said, adding that the farm has already reduced potato acreage by 30 percent.

“If current electricity prices remain at the same level, and for natural gas – at the same level, we will most likely within 12-18 months, if we stop growing potatoes and onions, will reduce the number of full-time employees from 10 to three. . In the summer we have 25 people on the farm, and we probably only have five,” he said.

Christina Rabekaite, CEO of renewable energy marketplace PPAYA, which works with farmers who are switching to solar power to control energy costs, said: “We work with many small businesses and it is clear that this is happening too hard and too fast. . Many wonder if they can even break even. Lack of business support during this transition, especially during a crisis, can lead to the complete collapse of many companies.”

Wholesale gas prices began to rise globally in 2021, a trend that accelerated after Russia’s invasion of Ukraine in February 2022.

Prices have started to fall from last year’s peak and are now below the levels they were at the beginning of the February invasion. But they are still three to four times higher than before the rise in prices in the summer of 2021.

Eddie Sulaiman, the owner of a small southeast London artisan bakery he opened during lockdown, has revealed how his electricity bills have nearly doubled to £500 a month over the past year. A combination of a government support package and new practices brought the bill down to £145-160 per month.

However, after Monday’s announcement of lower utility bills, Mr Suleiman is considering terminating the lease.

“I just can’t afford an extra raise because I don’t even work for free or break even, I just work at a loss,” he said.

“This is my energy, but as the energy of all companies increases, we will also see an increase in the prices of all the ingredients that we use. This is the entire value chain.

“I have a plan that this year will be a year of growth, and then all of a sudden with an announcement like this, it’s not. It will probably take a year to decompose.

Ministers say the new energy bill support system will protect taxpayers from the impact of volatile energy markets.

However, Tina McKenzie, political chair of the Federation of Small Businesses, criticized the government for “irresponsibly shifting the risk of future energy price spikes onto vulnerable small businesses.”

She said: “Our latest research shows that if wholesale energy prices fall after this, one in four small businesses will have to consider closing, downsizing or radically changing their business model. [current support scheme] find the end.

“So it’s unfortunate to hear that some small businesses are already considering doing so in the wake of the extremely disappointing post-March energy rebate announcement.

“Many small businesses with little to no cash reserves will not be able to survive on the pennies this absurd, absurd electricity bill rebate scheme offers: twopence less per kWh of electricity and halfpence less gas, assuming you reach. price threshold, do not even get on the pages of huge bills.

“From an East Sussex laundromat whose electricity bills have tripled to a small engineering firm in Leicester now paying 500% more for gas, how do you think these small businesses will cope with the surge in electricity bills?”

It comes after the brewery boss warned that drinkers could pay £10 for a pint of beer if pubs passed on higher energy prices to consumers.

Charlene Lyons, CEO of Black Sheep Brewery in Masham, North Yorkshire, said the industry is suffering from rising costs regardless of the scheme and breweries like hers are having to absorb most of the price increases.

She told BBC Radio 4 about it. today Program: “If we were to pass all price increases on to the consumer – energy, production costs like raw materials, everything – to the consumer, you’d be talking about charging more than £10 a pint, which is obviously unsustainable.”