Rachel Reeves should consider capping energy costs for businesses already struggling with bills and tax rises so they can survive the Iran war, a senior business leader has said.
Shevaun Haviland, director of the British Chambers of Commerce (BCC), told The i Paper the Chancellor should also consider cutting levies on companies’ bills and speeding up a scheme to help energy-intensive manufacturing firms.
Haviland added her voice to the growing pressure on Energy Secretary Ed Miliband to reverse his ban on new oil and gas drilling licences in the North Sea to boost energy supplies and bring down costs.
She spoke after Reeves promised to “keep costs down for everyone” and “provide support for those who need it most” if the Middle East conflict continues to send prices soaring.
Meanwhile, a Cabinet minister told The i Paper that active talks were taking place within Government about supporting businesses with higher energy costs, with Industry Minister Chris McDonald understood to have identified some interventions “pretty quickly, pretty cheap”.
“It’s a very live debate at the moment and conversations are happening,” the Cabinet minister said. “It’s just about Chris having to win those arguments in Whitehall and making sure the Secretaries of State see the opportunities for this as well.”
Gas bills for firms could soar by 80%
On Wednesday, Energy consultancy Corwnall Insight reported that as a result of the war, electricity bills for businesses would rise by up to 30 per cent, and the cost of gas by as much as 80 per cent.
According to The Times, that would mean a business such as a large retail and leisure site on an average year-long contract could see annual bills rise by £95,000 more than pre-war.
Reeves’s Commons statement on Tuesday focused on how she might soften the blow for households, with ministers by considering the expansion of a £150 discount on bills to more people.
But Haviland, speaking ahead of the BCC’s Driving International Trade Conference in central London, said businesses were also likely to need help if the war were to drag on.
She added that business was still reeling from the impact of Brexit, Covid and the increase in employer national insurance contributions (NICs), enacted by Reeves in autumn 2024, that was a “massive hit” for firms. In January, before the war had started, about a quarter of companies in the UK were already telling the BCC they were struggling with their energy bills.
Haviland said the “immediate massive concern” was for energy-intensive industries such as Staffordshire ceramics.
She suggested the Government could speed up a plan to reduce bills for more than 7,000 energy-intensive manufacturers, the British Industrial Competitiveness Scheme (BICS), which is due to start next year. “We will be talking to them about how they might want to look at that,” Haviland told The i Paper.
She said a price cap for small and medium-sized (SME) firms might also be required, alongside the rolling back of levies on company bills.
“A lot of SMEs buy electricity like consumers, consumers have price caps and businesses don’t. So that’s expensive, but let’s keep that option on the table,” Haviland added.
“Are there other options we can look at? So for example, when you look at energy bills for business, there are levies in there that the government could move. So we’re just saying to them – look, we’re a bit early on at the moment, let’s keep a really close eye on it, and then keep our options on the table.”
Pressure to life blanket ban on North Sea drilling
Alongside this, ministers must look at scraping the windfall tax on oil and gas companies – the energy profits levy – and lift the blanket ban on drilling in the North Sea, instead granting licences on a “case-by-case basis”, Haviland said.
“The challenge is the decrease in oil and gas is going faster than the increase in renewables, and that means all the people whose jobs rely on the supply chains around those are struggling,” added, calling on the Government to “rebalance this”.
“So more investment in renewables, but in the meantime, the energy profits levy is massively reducing investment in the North Sea, and that is a problem,” she said.
“it’s important to get to net zero, but we will always need some oil because half the things we use are made out of it – you can’t use wind power to make plastics, so we will always need a certain amount. So let’s all remember that.
“And also… we’re importing oil and gas rather than drilling our own, actually how is that impacting the environment?”
Haviland added: “We have to look at it in the round, look at it strategically. This [the North Sea] is a national asset. It’s just not being managed like that. It’s not being looked at strategically, both renewables and oil and gas over the long term, [and] how we’re using that as our jewel in our crown.”
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