British companies will also be able to benefit from electricity subsidies. The government announced on Wednesday that it would cover half of the electricity and gas bills of public companies and establishments for around six months, hit by soaring energy prices in the wake of the war in Ukraine.
“The government has set a subsidized wholesale price”, which will be “less than half of the expected wholesale prices this winter”, according to a press release from the Ministry of Energy and Business.
The support “will be equivalent” to that already announced for individuals – which caps energy prices for an average household for two years at 2,500 pounds per year (2,850 euros), i.e. a rebate of some 1,000 pounds ( 1,140 euros) compared to the wholesale price expected from October – and it includes the elimination of certain ecological levies, specifies the executive.
A price reduction of more than 40%
While the sum that will be covered will ultimately depend on the situation and the contracts of each company, NGO or public establishment targeted by the measure, it could result in a reduction of more than 40% of the bill for a pub or a school, according to examples provided by the government.
The new British Prime Minister Liz Truss announced an energy price freeze earlier this month, but did not detail the measures that would apply to businesses. The mechanism could be extended and more targeted, or replaced by support focused on the most vulnerable businesses or establishments.
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Soaring energy prices are one of the main factors boosting inflation at its highest in 40 years across the Channel, at 9.9% over one year in August, and the executive thus intends to put a kick stop these price increases. Faced with fears of recession, the government also intends to boost growth through all-out tax cuts.
Towards a slippage in public finances?
These measures, which have not yet been quantified, must be financed by borrowing. The cost of the energy freeze alone for households should climb, according to economists, beyond 100 billion pounds, raising fears in the markets of a slippage in British public finances. “We intervened to prevent businesses from collapsing, protect jobs and limit inflation,” the new finance minister, Kwasi Kwarteng, said in the statement.
The government is due to present a “mini-budget” on Friday to detail the aid measures to deal with the cost of living crisis, as well as their financing. The scale of the support is “almost like a panic reaction”, commented the director of the think tank Institute for Fiscal Studies (IFS), Paul Johnson, on the microphone of BBC Radio 4. But such measures “were inevitable”, while “some companies saw their energy bills quintuple”, according to him.