Business groups urge Shapps to help renegotiate energy contracts

Trade bodies representing over 100,000 businesses across the UK have written to Business Secretary Grant Shapps, calling on him to rethink plans to slash the support provided to shops, pubs and other local businesses amid fears of widespread closures in the summer.

The business groups, including the Association of Convenience Stores (ACS), the Federation of Small Businesses (FSB) the British Beer and Pub Association (BBPA) and the British Independent Retail Association (BIRA), said in the letter that the government’s Energy Bill Discount Scheme (EBDS) does not offer enough support or is not targeted appropriately.

The trade bodies have also urged the business secretary to enable businesses to renegotiate contracts that were agreed at the height of the wholesale energy market.

Earlier this month, the government announced its plans to dramatically reduce the amount of money it provides to businesses to help with soaring energy bills. Under the new scheme, a total of £5 billion will be scattered across all businesses, with a maximum discount of just under 2p per kWh available.

The current Energy Bill Relief Scheme (EBRS), which is running for six months from October 2022 to March 2023 is worth around £18bn. This scheme protects the hardest hit businesses, especially those who entered into fixed contracts at the height of wholesale market prices, from rates up to £1 per kWh for their electricity.

The less than 2p discount provided by the government in the new EBDS coming into force from April 2023 will put many of these essential local businesses at risk of closure, the trade bodies have warned.

“The government has failed in its attempt to come up with a solution to help businesses that need urgent support on energy costs, instead opting for a scattergun approach that won’t make a dent in the bills of thousands of shops facing huge hikes in the energy bills this year,” James Lowman, ACS chief executive, commented. “Without urgent intervention to allow businesses to renegotiate fairer contracts, local shops will be forced to close their doors in numbers.”

Martin McTague, national chair of the FSB said: “Many small firms have signed up to fixed contracts before the recent drop in wholesale energy prices. The government must not pull the rug from under these vulnerable businesses, exposing them to massive bill hikes in contracts they encouraged businesses to sign up to in the first place. Support for this cohort of vulnerable businesses - by allowing them to renegotiate contracts so they benefit from the wholesale price reduction - should be considered."

Emma McClarkin, chief executive of the BBPA, added that the cost of energy remains the biggest single issue facing brewers and pubs.

“Without question for many vulnerable businesses it will be the difference between being able to continue as a viable business and not. With the wholesale price of energy dropping so markedly in recent months, it only seems fair for the energy suppliers – who have seen huge profits recently – to pass that on to our members,” McClarkin said.

Andrew Goodacre, BIRA chief executive, said: “Last summer the energy market was chaotic with retailer and energy suppliers not sure what would happen next. As a result many businesses are tied into paying high rates for energy even though wholesale prices have fallen. Allowing these businesses to renegotiate will save money for the government but also be a lifeline for thousands of indie retail shops.”

The letter sets out that the option to renegotiate contracts should be automatically available to businesses where energy suppliers can confirm:

• they negotiated their new energy contract within the peak wholesale price period of 2022 (between July and December 2022)
• the level of wholesale price on the contract is above the EBRS wholesale price cap
• the end date of the contract to demonstrate the length of exposure to higher prices beyond the existing EBRS (from April 2023 onwards)

“We urge you to consider how you can facilitate support for these businesses to renegotiate their contracts with encouragement from government and the support of Ofgem,” the letter read.