29/11/2012 07:06 GMT

Energy Costs For Big Business To Be Subsidised By SMEs And Consumers

Energy price subsidies offered to energy-intensive big industries will be paid for by smaller businesses and consumers, under new terms revealed in the Energy Bill.

Under the published bill, revealed on Thursday, energy-intensive businesses will be shielded from unsustainable price rises. Energy secretary Ed Davey said: "Decarbonisation should not mean deindustrialisation. There would be no advantage in simply forcing UK businesses to relocate to other countries."

Ministers are yet to specify which industries will be exempt, or how much money they will save, but there is a fear that SMEs and consumers will be left to foot the bill.

The Telegraph spoke to the Department of Energy and Climate Change, where a spokesman confirmed the new exemptions would not affect the previously announced £7.6 billion total for subsidies by 2020 - meaning the money for them would have to be found elsewhere.

The spokesman insisted the impact of the exemption on others was "likely to be extremely small", but that hasn't been enough to calm concerns from small business industry bodies.

In a statement from the Federation of Small Businesses, national chairman John Walker said: "While we welcome the much needed certainty the Energy Bill will give to investors to help secure the UK's energy supply, we are concerned that small firms will be left exposed to ever-increasing energy bills.

"The remorseless rise in energy costs is hurting not only individual businesses but also the competitiveness of the UK as a whole. Our research shows that utilities are the main cause of rising business costs for 45% of small firms.

"What we really need is reform of the electricity market and investment in low carbon energy infrastructure to go hand in hand with radical changes in the retail energy markets. This would deliver tighter regulation of the big six energy companies and put in place stronger safeguards for both household and small business consumers."

Not everyone was put out however; John Cridland, director general for the Confederation of British Industries, said energy-intensive manufacturing was "finally getting its place in the sun".

"This is vital for such companies to play a key part in our low-carbon economy and it is good news that the government has listened to our calls to build in support at this early stage, which will ensure we reap the full economic benefits at the earliest opportunity," he said in a statement.

“The next vital debate is to decide how to improve energy efficiency and deliver real benefits to the economy. The current policy landscape is too complex, so we will look forward to seeing how today’s electricity demand reduction proposals can move us towards a simpler, more strategic approach.”

Davey has also championed the idea of reducing the UK's energy consumption, declaring that a reduction of 10% would save £4 billion in 2030. It is hoped this could be achieved by initiatives including installing more efficient equipment across businesses, such as better freezers in supermarkets.

Firms could also be paid to commit to permanent reductions in their electricity use, and an obligation on energy firms to help secure efficiencies extended to cover business premises has been suggested.