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Energy prices have been rising at an unprecedented rate since 2021. It has caused a significant amount of worry and stress for everyone across the UK. Both households and businesses are looking for ways to manage their soaring utility bills.
One in four small business owners has increased prices to cope with rising business costs and inflation, and 30% have said that they will have to reduce their energy usage to save on costs*. If you’re a business owner or an employee, then you may be wondering how to combat rising energy prices?
Why Are Energy Prices Rising?
In April 2022, energy prices spiked due to Ofgem, the energy industry regulator, raising the price cap on household energy bills by 54%. With another significant rise expected in October, it isn’t surprising that people are searching for ways to battle rising energy prices.
For businesses, it can be even more worrying. Unlike households, businesses who are on commercial energy tariffs aren’t protected against price caps and tariff prices have been rising due to the spike in wholesale energy prices. It was found that for some companies, business costs could rise by as much as 310%, with the average firm seeing a rise of 250%**.
Why are wholesale energy prices rising so fast?
There are multiple reasons why prices have increased across the globe, including:
• Unusually cold European winters in 2020/21, which have caused a squeeze on global supply.
• Hot summers in Asia, particularly in China and Japan, have increased this demand due to the need for air conditioning.
• The war in Ukraine has placed limits on Russian exports of gas.
What are the consequences of higher business costs
Small businesses are the backbone of the UK industry and represent the majority (roughly 99%) of all organisations in the UK. However, 70% of SME owners believe that the rising energy prices will impact the growth of their business.
Nearly two-thirds of companies spend between 5% and 20% of their total expenditure on energy, which means that when utility prices are high, it has a dramatic effect on overall business costs.
The Office for National Statistics (ONS) has revealed that 40% of the UK’s small businesses have less than three months’ worth of money left to support their business costs. This is worrying for business owners who have only just managed to survive the COVID crisis.
With inflation at an all-time high, it’s difficult to pass on running business cost increases to customers. Larger businesses and retail giants, such as Tesco, have the flexibility to reduce smaller profit margins in the short to medium term. However, small businesses that are part of their local community do not have this luxury with their finances. They risk alienating their customers by hiking up the prices. It can also put them at a competitive disadvantage compared to larger companies, which may disincentivise consumers from choosing small businesses.
Energy saving tips
We’ve put together some energy-saving tips for businesses that will help you battle against rising energy prices.
Green energy providers
One in ten small businesses has decided to go green to help reduce their business costs. In the UK, smaller companies have trailed behind larger firms on sustainability, with many of them stating they don’t have the budget to become more sustainable or have a carbon offset plan in place.
However, with rising energy prices, small businesses are reconsidering using sustainable providers. The industries that have accelerated their plans to use green energy providers include agriculture, transport, and the media.
Shopping around for cheaper, green energy deals will help combat business costs, as well as help the planet.
Energy saving calculator
To reduce energy bills, your business can calculate its energy consumption and then try to cut down on your energy usage. If you’re struggling to work this out, why not try Utility Bidder’s energy-saving calculator? https://www.utilitybidder.co.uk/compare-business-energy/business-energy-saving-calculator/
This tool shows businesses how they can cut their energy consumption. It provides an estimated number of savings they could make by making some simple changes. By focusing on four key areas (lighting, printers, air conditioning and computers) a small business could make a saving of £313 on their overall business costs.
Smart meters
Taking meter readers can be difficult when you’re running a business, but only taking readings now and then makes it hard to tell when you use the most energy and where you might be wasting it. Installing a smart meter will give you more control.
By using a smart meter, you can see how much you’re spending on your business’ energy throughout the day, which will help you adjust energy-heavy processes and cut down on wasted energy. Smart meters will also help you receive more accurate bills and reduce the hassle of taking manual meter readings.
What support is available for those unavailable to afford rising business costs?
If you’re worried about rising energy prices, then there is support out there for your business.
Ofgem recommends that if you’re a small business struggling to pay your energy bills, then contact your supplier directly to arrange a payment plan that will help spread out your payments over a longer period.
The UK government has a variety of grants and loan schemes energy - Finance and support for your business - GOV.UK (www.gov.uk)
available to businesses that are looking to reduce their energy bills. Additionally, the government has several incentives for businesses to reduce their carbon footprint and invest in green technology. Business energy savings will be at their highest if a company can achieve low or carbon zero, as it will improve their energy efficiency and reduce their overall tax and utility bills.
* Rising inflation, energy and business costs for SMEs | iwoca
** UK businesses face 250% gas bill increase as experts call for energy price cap to help SMEs (inews.co.uk)
Blog submitted by Utility Bidder https://www.utilitybidder.co.uk/