UK Business Energy Prices Capped, Businesses Welcome "Quick and Decisive Action"

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The UK government has announced "unprecedented" support for UK businesses as it limits the cost of fuel bills in a move that will underpin economic growth but materially raise the country's debt burden.

The Department for Business, Energy and Industry, said midweek that wholesale prices are to be fixed for all non-domestic energy customers at £211 per MWh for electricity and £75 per MWh for gas for six months.

This means wholesale energy prices for businesses will be effectively capped at "less than half" anticipated winter levels under the huge government support package.

"Had nothing been done costs might have doubled versus current levels with costs for businesses spiralling out of control. This plan will last for six months, starting in October, and then Liz Truss has said there may be some additional support which will be targeted at vulnerable businesses following a review in three months," says Tom Gilbey, equity research analyst at Quilter Cheviot.

The Energy Bill Relief Scheme will offer discounts for all firms for six months from October 01.

"We welcome government’s quick and decisive action to provide hard-pressed businesses with a substantial short-term fix to a long-term problem," says Matthew Fell, CBI Chief Policy Director. "The package will ease worries about otherwise viable businesses shutting-up shop and smaller companies especially will benefit from the discounted rate."

Hospitals, schools and other settings such as community halls and churches will also get help.

This support is in addition to the Energy Price Guarantee for households, that caps domestic energy bills at £2500 per annum.

"This intervention is unprecedented and it is extremely welcome that Government has listened to hospitality businesses facing an uncertain winter. We particularly welcome its inclusiveness – from the smallest companies to the largest - all of which combine to provide a huge number of jobs, which are now much more secure," says Kate Nicholls, CEO of UKHospitality.

100's of billions of pounds will be spent by the government to fund the package with the final figure difficult to cost given the fluctuations seen in global energy markets.

The UK's public debt pile will rise, regardless.

In this sense, it will give businesses some much needed relief. There are two immediate question marks however. First,

"how much will it cost and what is the impact on UK borrowing? Remember this comes on top of the announced £150bn package for households in the next two years. With the treasury refusing to publicise the latest OBR forecasts in this week's mini budget, it's no wonder that investors are selling the pound yet again this morning," says Walid Koudmani, chief market analyst at financial brokerage XTB.

"Nevertheless, this is a good first step," he adds. "The cap on wholesale energy prices was desperately needed for businesses with the high street especially facing a cold and dark winter ahead."