Truss warned of mass bankruptcies as firms left in dark

Government 'can sort out' energy cost crisis says expert

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Liz Truss has been warned that a vast number of companies could face bankruptcy as firms demand “absolute clarity” on the level of Government support they will receive amid the energy crisis. Despite the urgency of soaring energy bills and the cost of living crisis, Westminster was forced to prioritise Queen Elizabeth II’s death and push other plans to one side.

But following the minute’s silence, which will be led by the Prime Minister at 8pm as a final “moment of reflection” to honour the monarch’s life before Westminster resumes as normal next week, all eyes will turn back on Ms Truss and how she will tackle the energy crisis with regard to providing support for businesses.

It comes after a detailed package of support was promised for households, including a £2,500 freeze so families can swerve Ofgem’s alarming £3,549 planned price cap. But the Prime Minister failed to provide the same level of detail for businesses. 

Ms Truss has said that more details will be laid out next week, but firms have warned that there could be horrific consequences if the period of limbo drags on. Industries will be eager to hear what the new Business Secretary Jacob Rees-Mogg has to say too in his announcement on support for business on Wednesday.

While households are shielded by a price cap, there is currently no limit as to what businesses may be charged by suppliers as the cost of energy continues to soar. But the Government appears poised to introduce a cap for businesses similar to the measure involving households, which is expected to last six months.

The director general of the British Chambers of Commerce, Shevaun Haviland welcomed this, but she warned that further detail needs to be laid out urgently as firms need to find out whether they will have to scale back operations or not based on the level of support the Government provides.

She told the Guardian: “This cap will be a good thing for business. But we now need to know two things: first, what is the size of this? Then very quickly we are going to have to get into what is going to happen after six months.”

Ms Haviland added: “I have had several businesses say to me this is worse than Covid. Rising raw materials, soaring costs including labour, inflation at 10 percent and now energy prices. They do not know where to turn. In May, 23 percent of our businesses said they would have to scale down production or cease trading. It will have gone up significantly since then. The government has got to get on with it.”

It comes as a number of firms have seen energy bills skyrocket by 300 percent or more compared to the same period last year. And Ms Haviland is not the only one to stress the importance of the urgent need for the Government to lay out details of its support as soon as possible. 

An industry source said this week that the Prime Minister needs to “come up with a solution” within “days” to avert a disaster. They warned that providing assistance to businesses is “hugely complex” due to the way in which companies pay for energy as there is a huge variation in different negotiated contracts, making it more difficult for an overarching policy to encompass the same level of support for all companies.

The six-month price cap measure was also welcomed by other voices within the business sector, but many have warned that much more is needed on top of this. For small businesses, state assistance could prove even more vital.

Alan Thomas, UK CEO at Simply Business, said: The news that business energy costs will be capped for six months will have been welcomed by small business owners – providing short-term relief and ensuring more businesses can make it through the coming winter.

“But it’s clear that small businesses need more. They need a sustainable, long-term solution. With many still in recovery mode from the impact of the pandemic, rising costs and spiralling energy bills will put countless small firms at serious risk. The message from small businesses is clear: this is a pandemic-level crisis and the clock is ticking. It is no exaggeration to say that the impact of this energy crisis could be worse than the pandemic in terms of permanent closures.”

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However, it has emerged that the Prime Minister may slash business rates in half in a major bailout package. Bloomberg reported that this would involve 50 percent discount on the wholesale price that’s included in business energy contracts by fixing it to around the equivalent amount charged to households. 

The discounted price may reportedly stay in place for six months from October, but could potentially be extended. However, the exact amounts will depend on the wholesale price of energy, which has proved to be exceptionally volatile following Russia’s war in Ukraine and Vladimir Putin’s gas cuts to Europe, at the time when a business signed its energy contract. 

The business support package is expected to cost around £40billion, although a spokesperson has said the plan to support businesses with bills could be backdated, implying there may be delays to the support package. But the spokesperson did say that Westminster is working “at pace” to come up with a solution, reassuring that more details of the scheme would be laid out as soon as possible.

Ms Truss’s spokesperson said last week: “We will confirm further details of the business support scheme next week. The scheme will support businesses with their October energy bills and that includes backdating if necessary.” 

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