UK Treasury Signals Plans to Cut Energy Support for Businesses

The UK Treasury signaled it plans to cut funding to businesses to help them cope with surging energy bills as it seeks to restore order to the public finances.

Chancellor of the Exchequer Jeremy Hunt has been weighing how much assistance to provide companies when an existing six-month program of energy support worth £18 billion ($21.7 billion) expires at the end of March, and has delayed an announcement until the new year as he examines different options. 

The current program protecting businesses “is very expensive, and we need to ensure longer-term affordability and value for money for the taxpayer,” the Treasury said on Friday in an emailed statement. “That is why we are currently carrying out a review with the aim of reducing the public finances’ exposure to volatile international energy prices from April.”

The Treasury was responding to a report in the Times on Friday that Hunt plans a 12-month extension to the program that will more than halve the level of aid, costing less than £20 billion over the longer time frame. The Treasury declined to comment on the specifics of the report.

The chancellor has been paring back Britain’s energy support packages as he tries to stabilize the nation’s public finances, which suffered a shock under the short-lived premiership of Liz Truss.

Hunt had initially planned for the aid to become more targeted at vulnerable sectors, but officials in recent weeks indicated he was leaning toward a universal extension of the program, which was designed to shield firms from the pain of soaring costs linked to Russia’s war in Ukraine. 

“We will announce the outcome of this review in the New Year to ensure businesses have sufficient certainty about future support before the current scheme ends in March,” the Treasury said.

Hunt is considering many options and no final decisions have been made, according to a person familiar with his thinking who spoke on condition of anonymity.

Under the existing business support program, companies get a saving of as much as £345 for a megawatt hour of electricity and £91 for a megawatt hour of gas.

Hunt was due to make an announcement on what would happen from April by year-end but the decision has since been delayed, sparking consternation from businesses facing uncertainty over their energy bills. 

--With assistance from Reed Landberg and Andrew Atkinson.