This article was co-authored by Sally Milner, Trainee Solicitor, Manchester and Tegan Johnson, Solicitor Apprentice, Sheffield.
In July 2022, the annual rate of UK inflation (10.1%) was the highest it has been since 1982, affecting the affordability of goods and services. The high rates of inflation are predominantly due to supply chain disruptions and consumer demand, and the substantial increases in energy prices, although the UK inflation rate eased slightly in August to 9.9%, reportedly due to a monthly fall in petrol and diesel prices and smaller upward contributions from the price of food and clothing.
Support for businesses
Whilst a support package for households was announced by the government which includes a new energy price guarantee, to date, businesses (which were not covered by the new energy price cap) have had to absorb the impact of rising gas and electricity prices themselves. This is likely to have impacted the previous increase in inflation rates as energy bills were passed down the supply chain, raising fears that some businesses would be forced to close.
The recently published Company Insolvency Statistics for 1 April 2022 to 30 June 2022 (Q2 2022) show there were 5,629 (seasonally adjusted) registered company insolvencies during this period, an increase of 81% from Q2 2021. A possible explanation for this increase is likely to be a result of the remaining measures introduced by The Corporate Insolvency and Government Act 2020 (CIGA), for the purpose of helping to protect companies affected by lockdown restrictions during the pandemic, having come to an end on 31 March 2022. However, the subsequent increase in Q2 2022 is more likely to be explained by the increase in businesses experiencing financial difficulty as energy prices and interest rates rose.
Energy Bill Relief Scheme
On 21 September 2022, the UK Government published details of the Energy Bill Relief Scheme, which intends to offer similar support to businesses as that provided for consumers.
Under the scheme, the government will provide a discount on wholesale gas and electricity prices for all non-domestic customers (including all UK businesses, the voluntary sector and the public sector, such as schools and hospitals). The level of price discount for each business will vary depending on their energy contract type and circumstances.
The discount will apply to:
- Fixed contracts agreed on or after 1 April 2022, in addition to deemed, variable and flexible tariffs and contracts.
- Energy usage from 1 October 2022 to 31 March 2023.
The scheme will run for an initial six-month period and savings are expected to be seen in bills for energy usage throughout October, which are typically received in November. The support will automatically be applied to bills, without the need for businesses to apply to the scheme.
A review into the operation of the scheme will be published after three months, for the purpose of informing the government’s decision on the type of future support, if any, to be offered to businesses after March 2023. The review will focus in particular on identifying the most vulnerable non-domestic energy customers and how the government will continue to assist them.