Britain’s Chancellor of Finance Jeremy Hunt announced a reduction in aid to companies for energy costs on Monday, after warning that the current amount was not sustainable for the country’s public finances.
Reduced bills instead of price cap
The new measures will take over from the current aid program, which expires at the end of March, and should last one year. They grant eligible companies a reduction in their invoice and not a fixed price cap as at present.
Especially energy-intensive sectors, such as steel, glass or ceramics, will benefit from a further reduction.
“Wholesale energy prices are falling and are now at the level just before” the Russian invasion of Ukraine, Finance Minister Jeremy Hunt said in a statement, adding that this plan was intended to provide more “certainty ” to the companies.
“Even if prices go down, I am concerned that this decline will not be passed on to companies,” he added, explaining that he had written to the energy regulator to find out if “additional measures were needed to ensure that the market works.” for business”.
The Finance Department estimates that the current level of aid costs more than 18 billion pounds (20.4 billion euros) over six months and that extending it could cost tens of billions of pounds more, depending on the level of the wholesale price.
The new plan is capped at 5.5 billion pounds (6.2 billion euros) and aims to strike a balance between supporting businesses and exposing public money to volatility in energy markets.
11% inflation in the UK
The UK government is capping private and business energy bills this winter and paying the difference to energy companies. He had warned that the level of business support would be reviewed in early January.
Starting in April, aid to individuals will also be less generous, with the bill limit rising from £2,500 to £3,000 a year for the average household.
Energy prices, driven above all by the war in Ukraine, are pushing inflation to all-time highs in the UK – approaching 11% and causing a severe cost-of-living crisis.
Business representatives protested against this reduction in aid, warning of job losses and increased risks of bankruptcies as the country slips into recession.
But Tom Thackay of the CBI employers’ organization said continued government support offers “a breather for many businesses.”
“The government has done a lot to protect companies,” but “it must remain open, flexible and pragmatic in its approach to wholesale price volatility in the energy market,” he added.
However, oil and gas prices have fallen sharply since reaching their highs at the start of the war in Ukraine, falling back to their level in late 2021.
Source: BFM TV
