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Live sector cautiously welcomes energy price cap, but says more action still needed

By | Published on Wednesday 21 September 2022

Live music

The UK government has announced more details about the new temporary energy price cap for businesses, which it says is “equivalent to the wholesale element of the energy price guarantee for households”. The move has been welcomed – somewhat cautiously – by the live music and night time sectors, although industry organisations say more support is still required.

It was announced earlier this month that UK businesses would benefit from an energy price cap for the first time, designed to protect said businesses as energy prices soar. While specific details were provided about a new cap for domestic energy consumption, which was lower than what had previously been announced, the government was initially a bit vague about what help businesses would receive.

Now companies have learned that there will be a “supported wholesale price” cap set at £211 per MWh of electricity and £75 per MWh for gas. This will benefit “all UK businesses, the voluntary sector like charities and the public sector such as schools and hospitals”. It will take effect on 1 Oct and apply to all fixed contracts agreed since 1 Apr this year. Companies on other types of energy contracts will also benefit from cuts, although these will be calculated slightly differently.

“This is equivalent to the wholesale element of the energy price guarantee for households”, said the government in its announcement. “It includes the removal of green levies paid by non-domestic customers who receive support under the scheme”.

The new price cap for businesses will be in place for six months, with further targeted support available to sectors identified as vulnerable after the initial period is up.

When support for businesses was originally announced, the UK’s Music Venue Trust said that the plan “only goes some way in alleviating the challenge” faced by grassroots venues regarding their surging energy bills, while the Night Time Industries Association called it a “half measure package”. However, both have now welcomed the newly outlined plan, albeit with some concerns remaining.

“We welcome the detail of the long awaited announcement of the energy bill relief scheme for businesses, and [will now] cautiously work through the impacts and benefits of the scheme with members”, says NTIA chief Michael Kill. However, there are already some concerns, he adds.

“We remain concerned that this measure to cap the wholesale price to energy supply companies may not result in sufficient relief being extended to business customers”, he explains, “given that energy suppliers remain free to impose additional mark-ups such as network charges and operating costs, which are uncapped. The net result of this could be a position where small businesses are still being asked to pay unaffordable energy bills of several hundred percent more than in previous years, which is clearly not sustainable”.

He also notes that “this proposal will exclude businesses that renewed before 1 Apr where energy costs were still untenable, and does nothing to alleviate the high levels of energy supply debt incurred by businesses exposed to uncapped pricing over the last few quarters, and in isolation is unlikely to be enough to ensure businesses have the financial headroom to survive this winter”.

Kill also says that it is the NTIA’s view that this six month package of support does not go far enough to ensure the survival of night time businesses.

“To ensure the survival of our sector”, he adds, “it remains imperative that the short term relief announced today is extended to twelve months and followed up with further action by the government in the budget this Friday, and that such action must incorporate our core asks, specifically business rates relief and a reduction in VAT across the board”.

“The measures being discussed to date such as corporation tax relief will simply not be sufficient, given only one in four hospitality businesses would currently benefit from such measures, as three out of four are not trading profitably”, he concludes.

Also commenting on this morning’s announcement, MVT CEO Mark Davyd says: “Music Venue Trust warmly welcomes this intervention by the government, which appears at face value to comprehensively tackle the immediate short term energy crisis for grassroots music venues”.

Not sure if “warmly” was an intended pun there. Also, like Kill, Davyd points out that what is being offered now is only a short-term solution, and further government intervention is likely to be needed if grassroots venues are to survive the ongoing increases in energy prices. While the government has said that there will be further support for sectors that require it after the initial six month period, it’s not yet clear enough whether this will cover small music venues.

“The government has indicated that ‘pubs’ will attract support for longer than the six month initial period based on the special circumstances of the energy crisis in relation to the operation of their business”, says Davyd. “We have asked for urgent clarification that the broad term ‘pub’ includes music venues and other licensed premises essential to the grassroots music ecosystem, and anticipate that this will be the case”.

“It should, however, be noted that suppliers to this sector face extraordinary financial pressures resulting from the cost of living crisis and the COVID period”, he goes on. “We have presented to the government the case for action on VAT and business rates and await the statement by the Chancellor on Friday to see what further action will be taken to stabilise the sector and return it to growth”.

“Music Venue Trust has requested that the government work with us on long term plans to secure affordable, sustainable and resilient energy for the sector”, he adds. “There is a big opportunity presented by this crisis to support a radical intervention into energy supply and demand and we strongly urge the government to use the period of protected energy prices to bring forward plans to permanently tackle the causes of the energy crisis”.

“Music venue real estate is a prime candidate for renewable energy investment”, he concludes, “and we look forward to working with the announced Energy Supply Taskforce to realise that opportunity”.

LIVE – which speaks for the wider UK live music sector – has also issued a statement, welcoming the energy price cap but also urging the government to make a longer commitment, and to cut VAT and business rates too.

“We welcome this support from government, but we are clear that this needs to be sustained past the next six months”, says LIVE CEO Jon Collins. “Spiralling energy prices have already forced music venues up and down the country to close or curtail their programming and this will begin again as soon as this support is removed – it is plainly obvious that live music must be on the list of sectors considered ‘vulnerable’ by government”.

“With our industry still hurting from the after effects of COVID and rising costs across the supply chain, we continue to make the case that our sector needs action on VAT and business rates if we are to keep all concert halls, arenas, festivals and grassroots music venues open, bringing joy to millions and showcasing the best UK and international talent”, he concludes.

As you should have picked up already from these statements, a new emergency UK budget is set to be unveiled this Friday.

This will be the first big test of new Prime Minister Liz Truss, and is expected to include various tax cuts, including the cancellation of planned rises in national insurance and corporation tax, the scrapping of green levies on energy bills, and possibly the scrapping of a cap on bankers’ bonuses.

This story is discussed on this edition of our Setlist podcast.