Last week’s Budget brought a smattering of short-term relief for households struggling with soaring energy bills but no further help for businesses. Chancellor Jeremy Hunt jumped in ahead of his Budget statement to the House of Commons and confirmed the widely leaked decision to extend the Energy Price Guarantee (EPG) ceiling of £2,500 for 3 months up to July, covering domestic customers. Previously, the Government planned to see the ceiling rise to £3,000 on April 1st.
The EPG sits alongside the Energy Price Cap (EPC), which itself was introduced in 2019 in response to surges in energy costs. The EPG is lower than the EPC and limits the energy bill for a “typical household”. From July it will be £3000 until the scheme ends in April 2024. Under the scheme, the government compensates energy providers for any extra energy bill costs households incur above that average limit.
Help for business
The Chancellor offered no further direct help on energy costs for businesses and is expected to roll back its support for non-domestic customers from April 1st with the end of the Energy Bill Relief Scheme. This will mean higher energy bills for millions of businesses.
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The Chancellor did increase the Annual Investment Allowance to £1m, which means that 99% of smaller businesses can deduct the full value of investment in IT equipment, plant or machinery from that year’s taxable profits. And SMEs will be able to claim a credit worth £27 for every £100 they spend if they spends 40% or more of their total expenditure on research and development. Corporation tax for businesses is to increase from 19% to 25%, as planned.
Hunt also announced 12 new Investment Zones across England, with each backed by £80m funding, including “generous tax incentives” in the form of a new tax break regime for businesses. This should help offset a planned rise in corporation tax, from 19% to 25% on 1 April.
Green economy
The Investment Zones flesh out ideas first floated in the Autumn Statement last year, which the government promotes as a “pioneering new approach to accelerate research and development in the UK’s most budding industries”, including the green economy and clean technologies.
The zones will be grouped around existing research institutions such as universities. The investment zones are in part a response to urgent appeals from businesses, civil society, and opposition parties for strategies that can push back against the commercial effects of the US Inflation Reduction Act (IRA) that has promised $369bn in tax incentives and subsidies for domestic clean technology investments.
There is a compelling need to provide a stable and attractive policy and investment environment to underpin the UK’s competitiveness as global competition for green investment grows. The EU Commission has committed around 1 trillion Euros to green policy and strategy, announcing a Green Deal Industrial Plan, boosting by new regulations and funding programmes in the Net Zero Industry Act launched this week.
Carbon capture
As part of support for the green economy, the chancellor also confirmed a £20bn investment in carbon capture technology over the next 2 decades. The government target is for at least one low-carbon industrial cluster with carbon capture to come online this decade, and forecasts capture pf between 20 million and 30 million tonnes of CO2 per year by 2030.
He has also extended the Climate Change Agreement scheme for two years to allow eligible energy-intensive businesses £60m of tax relief on energy efficiency measures. The moves are part of a “reset” of government efforts to clean up the UK’s domestic energy supply and safeguard energy security with the ambition to create up to 50,000 high-skill green jobs. The new focus includes a competition to develop small modular nuclear reactors (SMRs).
Following the announcement of nuclear energy investment as outlined in Hunt’s statement where increasing nuclear power is said to become a critical source of cheap and reliable energy. Lee Hyde, Director of Sustainability as a Service comments:
“Resorting to nuclear is a lack of imagination – we need to invest in our under-developed energy infrastructure. As homes and businesses decarbonise, opting for solar, battery, heat pumps and EVs, there will be an increased demand for electricity. With DNO applications on the increase, we need to invest in infrastructure in order to accommodate the demand for renewable energy installations. This will be key in the race to net zero.
“The government and institutions responsible for investment in infrastructure and policy development need to prioritise this country’s energy security. We need home-generated, clean, green, and affordable energy.”
Commenting on ESG and staff retention guidance for small businesses in the UK, Hyde says:
“Under the current economic climate and in combination with how we change our behaviours and the impacts that our businesses have on the nation’s environmental targets, employee benefit schemes need to focus on ESG, and organisations need to see this as a mutually beneficial symbiosis. Be it through carbon literacy which has been shown to embed employee behavioural change in the workplace producing tangible cost savings, typically between 8-15% or the ability to decentralise operations and significantly reduce overhead costs and ultimately operational carbon footprints.
“We are seeing a new generation of talent emerging making employment decisions based on ESG credentials. A recent study shows that come 2029, the Millennial and Gen Z generations will make up 72% of the world’s workforce, compared to 52% in 2019. This future workforce will continue to place greater emphasis on these global issues than any other generation and will demand more from employers on these issues and ultimately will make career decisions on these values over just simply a figure in a paycheck.”
