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U.K. Cuts Energy Bills for Firms Through Winter


The British government announced details of a plan on Wednesday to chop energy costs for firms over the winter, after industry groups warned that soaring bills were threatening the survival of countless businesses.

Starting in October and lasting for six months, businesses, charities and other public sector organizations including schools and hospitals will see the wholesale price per unit they pay for energy set at 211 kilos (about $240) per megawatt-hour of electricity and £75 for natural gas. The federal government said this was lower than half of the wholesale prices anticipated for winter. It would revert prices back to where they were within the spring, in response to Cornwall Insight, an energy research and consulting company, which said the reduction to energy costs can be “substantial.”

Energy prices have soared across Europe as Russia has restricted the flow of natural gas to the region and countries have scrambled to seek out alternative sources of energy. While wholesale gas prices, which have a big influence on electricity costs, have dropped from recent record highs, they’re still much higher than in recent winters. Households and businesses in Britain, even with the caps, are still confronting higher than usual energy costs, which have contributed to rising prices for other goods and services, squeezing budgets.

The business-focused plan accompanies a sweeping initiative to freeze household energy bills for the following two winters. These expansive policies have been announced without official estimates of how much they may cost. Economists predict that the household bill freeze could cost £150 billion. But because the plans depend upon volatile wholesale market prices for energy and a wide selection of business contracts, the eventual bill is uncertain. Economists expect a big increase in government borrowing to fund the policies.

Martin Young, an analyst at Investec, estimated that the associated fee for the business policy could range between £22 billion and £48 billion. Cornwall Insight said the associated fee to the federal government may very well be £25 billion.

The brand new government, under Prime Minister Liz Truss, has just begun its work in earnest after a national mourning period for Queen Elizabeth II. Ms. Truss announced the plan to limit household bills on Sept. 8, promising “equivalent support” for businesses. Hours later, the queen died, putting much of presidency activity on hold.

Now, the burden of the economic and social crises facing Britain have returned to the fore, with consumers contending with the fastest increase in inflation for 40 years and the specter of recession looming over the economy. Ms. Truss and her chancellor of the Exchequer, Kwasi Kwarteng, have committed to boosting economic growth quickly. They’ve argued that tax cuts will do that, and a few of these cuts are expected to be announced later this week. With big spending and tax cutting outstanding on the agenda, there are signs that the federal government’s fiscal plans aren’t sitting well with investors.

“We have now stepped in to stop businesses collapsing, protect jobs and limit inflation,” Mr. Kwarteng said in an announcement on Wednesday.

The discount that firms receivewill vary depending on the kind of contract a business has signed — for instance, variable or fixed — and after they agreed it. There might be maximum discounts applied to variable tariff contracts. The federal government also said it intends to review the subsidy in three months and discover essentially the most vulnerable businesses that it might keep supporting after six months.

“This support package is critical and can ease the associated fee pressures which were piling up on businesses,” Shevaun Haviland, the director general of the British Chambers of Commerce, said in an announcement. She added that support for six months wouldn’t be long enough to encourage businesses to make investment plans.

“There are a selection of other challenges that have to be addressed including labor shortages, supply chain disruption, and rising raw material costs.” Ms. Haviland added.

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