The government has unveiled plans to cap household energy bills at £2,500 a year for two years from October, but support for businesses will be more limited.
Businesses will see “equivalent support” to that for consumers with energy costs capped at the same price per unit that households will pay, but only for six months.
New prime minister Liz Truss promised a review of the proposals for business in three months and said the measures could be extended for “vulnerable industries”, likely to be the highest energy users.
The measures promise short-term relief for hard-pressed businesses and should alleviate some of the pressure on household finances.
The typical household gas and electricity bill had been due to rise from £1,971 to £3,549 in October. Business gas and electricity bills are uncapped.
The support to households will come through a new Energy Price Guarantee which limits the price suppliers can charge for units of gas.
Details of the support for business have yet to be released.
The government has also yet to spell out how the price guarantee will be funded, most likely through additional government borrowing.
The cost of the scheme has been estimated at up to £150 billion, more than double the cost of the government’s furlough scheme during the Covid-19 pandemic lockdowns.
New Chancellor Kwasi Kwarteng will set out the expected costs in a statement later this month.
Abta chief executive Mark Tanzer said: “While it is good the government is introducing a cap on business energy bills, which we and other industry bodies have been calling for, it is disappointing that the measures announced today only last for six months initially.
“We need to understand further how the review process will work for deciding which companies will be considered for further support after this. Travel businesses should be eligible; the next six months represent the low season for travel, and most travel companies are still recovering from the impact the of Covid restrictions, with many having loans due for repayment.”
He added: “With a fiscal statement expected later this month and an Autumn Budget still to come, government must look at the other ways it can support businesses with rising costs including extending business rates support and working with banks to provide respite with the repayment of business loans taken on during the Covid crisis. Our members are heading into the cost-of-living crisis after the worst two years in the industry’s history, with small to medium sized businesses particularly vulnerable.”
Truss ruled out a windfall tax on energy companies to pay for the price cap despite a UK Treasury estimate that the companies could make £170 billion in profits in the next two years.
The new PM claimed the plan could curb rising inflation by up to five percentage points.
However, the measures are likely to lead to a sharper rise in interest rates by the Bank of England from next week and trigger a further fall in the pound which would, in turn, boost inflation.
The pound hit its lowest level against the US dollar since 1985 yesterday at $1.145 and the Bank of England has warned the UK will fall into recession this autumn.
Labour leader Keir Starmer hit out at the plans which include lifting the ban on fracking and licensing new oil and gas drilling in the North Sea, denouncing it as “ludicrous” to turn to fossil fuels amid the growing climate crisis.
Starmer has called repeatedly for a windfall tax to pay for an energy price cap.