UK energy bill cap lends relief to packagers, promises “knock-on” effect throughout sectors

22 Sep 2022 --- Under a significant government support program, energy bills for UK firms will be reduced by around half this winter from their anticipated level. The Energy Bill Relief Scheme follows ministers’ announcement of a £150 billion (US$170 billion) plan to assist homeowners with their surging costs for two years.

Companies’ energy prices have doubled on average, with a number of businesses reporting costs increasing five-fold.

Starting on October 1, the plan will freeze wholesale gas and electricity prices for businesses, schools and charities for a period of six months, protecting them from crushing expenditures due to energy costs skyrocketing as a result of Russia’s Invasion of Ukraine.

Industry organizations praised the plan but cautioned that additional funding will be required after the winter. 

The scheme protects businesses from crushing expenditures due to the energy costs surging as a result of Russia’s invasion of Ukraine.In a statement to PackagingInsights, Food and Drink Federation CEO Karen Betts says: “We welcome the scope of the Government’s Energy Relief Scheme and the speed with which it’s being rolled out.”

“It addresses the largest and most volatile cost pressure facing our industry right now. Although some aspects of the scheme are still to be clarified, it offers relief to food and drinks manufacturers across the UK.”

Vulnerable eligibility
Although it is anticipated that the program will be evaluated after three months, with the possibility of extending help to “vulnerable businesses,” it is unclear what industries will fall into this category.

According to the UK government, the program is applicable to businesses that had fixed deals at higher pricing on or after 1 April, when energy costs began to soar. They will also be qualified if they have variable or flexible tariffs.

British Plastic Federation (BPF) Membership Services director Stephen Hunt addresses eligibility, telling us that “this scheme is a step in the right direction when it comes to supporting businesses and jobs. The plastics industry is vital to the UK economy and supplies key products to almost every sector, so support for the plastics industry has a knock-on effect.” 

“Plastics manufacturers have cited high energy bills as a major concern for some time. A survey we conducted of our members earlier this year found that 62% of companies are on fixed-term contracts, with half of those on contracts due to expire this year,” says Hunt.Industry is now concerned how long the energy cap scheme will last.

“Many businesses will therefore be eligible for this support, although the criteria are yet to be reviewed by us in detail and may need to be broadened. The average increase to the cost of energy being reported by companies is more than double (2.3 times), with a number of reporting costs increasing five-fold – a clear challenge for any business.” 

He continues that as a trade association, BPF Membership Services have been liaising with government representatives regularly on this issue for many months. “We will be monitoring the scheme’s impact and continuing to work with the government to help finalize some of the details and ensure that the plastics industry gets the support it requires during these challenging times.” 

Chain reaction
A spokesperson for Macfarlane Group, which runs leading UK, Ireland and Continental Europe-based businesses in the packaging sector, has elaborated to PackagingInsights on the matter as a business that functions mainly in distribution.

“Direct energy costs for Macfarlane are a relatively small component of the company’s overall cost base. Energy costs are a more significant component of the cost structure of our suppliers and therefore have an impact on the prices they charge us for their products.”

Macfarlane holds that the proposed government scheme provides some short-term security on energy pricing and is therefore helpful but asserts that “more detail is needed on the longer-term plans.” 

“We will employ our best efforts to manage the impact of any energy price increases on our customers,” Macfarlane concludes.

By Mieke Meintjes