HM Treasury will scale back government support for business energy bills from April following a warning it is becoming too expensive to sustain.

A new energy support scheme for businesses will be introduced based on a discount applied to wholesale energy prices instead of the current price cap. The new scheme will run until the end of March 2024.

However, businesses operating in heavy energy-use sectors will qualify for a more significant discount. Those qualifying for larger discounts include steelmakers.

The new discount scheme means businesses will only benefit from government support when energy bills are high.

But firms will only benefit from the scheme when energy bills are high.

As things stand, wholesale gas prices have fallen below their level from before the Russian invasion of Ukraine, with a mild winter expected in Europe and stockpiling contributing to falling prices.

The new government discount scheme will be capped at a cost to taxpayers of £5.5 billion, with the existing business discounts forecast to cost around £18.4 billion for six months of support.

Read more about the scheme on the .Gov site

A new insulation support scheme could cut household bills

Commenting on the changes, Chancellor Jeremy Hunt said:

“My top priority is tackling the rising cost of living – something that both families and businesses are struggling with.

“That means taking difficult decisions to bring down inflation while giving as much support to families and business as we are able.”

Under the terms of the new scheme, energy bills for non-residential properties will be automatically discounted by up to £6.97 per megawatt-hour (MWh) for gas and up to £19.61 per MWh for electricity.

According to HM Treasury, these discounts are equivalent to around £2,300 for a typical pub.

Larger manufacturers will receive discounts of around £7,000 over 12 months, based on current prices.