Industrial bakery equipment

Source: Getty Images

Baking industry trade groups have joined forces to raise concerns over the recently announced Energy Bills Discount Scheme.

The Federation of Bakers, Craft Bakers Association and Scottish Bakers are among groups who have signed a letter warning Chancellor of the Exchequer Jeremy Hunt that high costs and a lack of clarity in aspects of the scheme will leave businesses considering their future.

Coming into force from 1 April, the scheme will give all eligible non-domestic energy users a discount on high energy bills. Businesses in sectors with high levels of energy use, including baked goods manufacturers, will be able to apply for a higher discount under the Energy and Trade Intensive Industries (ETII) scheme.

While saying they ‘broadly welcome’ the scheme, the trade groups point out that it will lead to increased energy costs for businesses and mean bakers are exposed to fluctuating wholesale energy prices.

“This will be damaging for businesses already locked into higher contract prices unless provision is made to help them renegotiate existing contracts fixed at prices higher than the prevailing wholesale rates,” they state.

The letter also asks for confirmation that the higher discount offered by the ETII scheme will apply to all bakeries.

And it points out that the increase in the threshold price for relief for gas to £99mwh means businesses will pay at least 32% more under the ETII scheme than they are under the current Energy Bill Relief Scheme.

We fear many businesses will be placed under intolerable strain

“With high levels of gas usage in the sector and wholesale gas prices remaining volatile, we fear many businesses will be placed under intolerable strain,” it states, adding that despite a reduction in the threshold price for electricity, current market prices mean businesses will pay at least an extra 12%.

The trade groups said they were concerned about the lack of detail on how rebates will be applied and whether the discounts are linked to daily, weekly or monthly wholesale prices, or averages over another period.

“This, coupled with a general lack of transparency on wholesale prices from suppliers, will bring further instability to businesses as they try to plan their budgets for the year ahead with little certainty,” they wrote.

“We fear that this burden of pressure, in addition to the inevitable higher energy costs will make some businesses consider their future.”

The letter ends by urging Hunt to look at how the scheme could bring greater stability to this baking sector, and that the trade groups would welcome an opportunity to “share the pressures our collective membership is facing”.

The letter, which is dated 12 January, is signed by:

  • James Slater, president, Association of British Ingredient Manufacturers
  • Karen Dear, director of operations, Craft Bakers Association
  • Andrew Pyne, chief executive, Federation of Bakers
  • Alasdair Smith, chief executive, Scottish Bakers
  • Sonia Lourenco, UK Association of Producers of Yeast