How to deal with the rising energy prices is the challenge which all governments around the world are trying to cope with. But here is a comparison between the two European giants – the UK and France.
While the French government last week forced the country’s power suppliers to offer small businesses struggling with price hike a guaranteed tariff of 280 euros ($298) on average per megawatt hour, the UK is moving in a different direction: it is introducing a new scheme in the House of Commons on Monday which offers a discount on gas and electricity rather than fixed rate under the current one that will expire in March.
Last week, Chancellor Jeremy Hunt told industry leaders that the current scheme to support businesses was “unsustainably expensive”.
The energy support scheme is mainly used by businesses, but is also for charities, and public sector organisations such as schools and hospitals.
But the total level of government support is expected to fall sharply – by more than half – from the £18.4 billion the current six-month scheme is estimated to have cost by the time it ends.
This is partly due to wholesale energy prices falling very sharply in recent months. European gas reserves have held up better than expected thanks to an unusually mild winter in northern Europe.
Wholesale gas prices are now below the level they were before Russia’s invasion of Ukraine, but still three to four times higher than their long-term average.
Annette Dolan, managing director at Bath Aqua Glass, a glass-blowing company, said even with the fall in prices she was looking at an annual energy bill of £119,000 a year. “And that’s before they put the standing charge on so it is still unobtainable,” she told the BBC.
She said that the government should have capped wholesale prices from the beginning, and she warned that if prices don’t come down further she will have to start letting staff go.
“I’m going to have to work with the smallest amount of people to keep going because that’s the only way a small business can keep going.”
All businesses can expect their energy bills to rise after March. However, Matt Snell, chief executive at Gusto Restaurants, said the current help from the government “has not really touched the sides”.
He said his company normally spends around £750,000 on energy a year. “And even with the so-called government support in place our bill went up by over £800,000 so it is forecast to be £1.5m for this year,” he said.
At the same time that help for businesses is changed, government support for households will become less generous.
The bill for a typical household could rise from £2,500 a year to £3,000 a year from April – although energy analysts cautiously forecast that average bills may fall to £2,800 a year next October if current market conditions continue.
That would be a crumb of comfort for households and could save the government billions in subsidies.
But the bottom line is that energy prices are going up this year for businesses at the same time as their customers’ incomes are being squeezed even further.
The French solution
But in France, power suppliers have agreed to offer small businesses a guaranteed tariff of 280 euros. “This is a guaranteed tariff and it is an enormous relief,” said Finance Minister Bruno Le Maire said after a meeting with energy executives last week.
Earlier, President Emmanuel Macron had urged energy suppliers, including EDF and TotalEnergies, to do more to help customers cope with the surge in energy prices that has in recent months driven inflation to record highs.
Macron had said it was unacceptable that companies reap excessive profits when many small businesses are struggling.
A large part of France’s small businesses, which according to the official definition include all firms with fewer than 10employees, are already protected by a 15 percent price increase cap for household gas and power tariffs.
But some last year needed to sign new contracts on the open market when prices jumped and, lacking sufficient cash reserves, are now struggling with their bills.
Will do everything to save anything French like the baguettes
Before making the announcement last week, Le Maire had said: “If the French baguette is listed as a UNESCO World Heritage Site, it is thanks to the know-how of our bakers.”
“We are at their side to help them cope with soaring energy prices. We won’t let anyone down,” he said and pointed out that energy companies were not doing enough to help the bakeries cope with soaring energy bills.
The statement came as officials noted that the government had “the tools to make energy suppliers meet their commitments towards the state and the companies.”
Earlier, it was reported that thousands of French bakeries were facing closure after being hit by rising energy costs with nearly 80 percent of French bakeries making baguettes on the brink of bankruptcy.