Energy Costs Are Increasing
April the 1st brings a surge in energy costs across the UK. Huge energy price rises will be devastating for many small and medium-sized firms who are still trying to get back on their feet after the pandemic and Brexit.
FSB chair Martin McTague said that the soaring bills, “will spell the end for many of the quarter of a million firms that say they are on the brink of collapse”.
Small enterprises (those with fewer than 50 employees) represent the vast majority (roughly 99%) of all businesses in the UK and are considered the backbone of all UK industry. While commercial energy tariffs will rise for all businesses, small and large, the impact will be felt most keenly by small businesses with tighter margins and lower cash flow.
The current unstable energy market is seeing suppliers withdraw tariff propositions at short notice. This is making it harder for business customers to secure the contracts they need, and may lead to them facing higher costs given the nature of this volatility, according to data from energy analysts Cornwall Insight.
SMEs are not protected by the energy price cap
Business energy is different to domestic, with fixed-price contracts commonly in place for one, two or three years. However, when this period comes to an end, most will face soaring prices for whatever tariff they choose.
An analysis from the Federation of Small Businesses (FSB) showed a £10,000 increase in utility bills over the past year for a typical London-based business.
Potential consequences of higher energy bills for SMEs
In 2021 on average businesses were paying 15p/day. Today on average businesses will be paying 26p/day.
Small and medium-sized businesses (SMEs) have faced an average gas bill hike of more than 250 per cent in the last year, new research has revealed.
The study, by energy analysts Cornwall Insight, found that gas prices paid by SMEs in the first three months of 2022 had soared by this amount when compared with the same period in 2021.
Research by Tyl by Natwest suggests that nearly two thirds of businesses in the UK spend between 5% and 20% of their total outlay on energy. This represents a significant proportion of their total running costs, meaning that large price rises will have a dramatic knock-on effect on businesses’ ability to operate at a profit. Indeed, the same survey found that “70% of SME owners believe that the cost of their energy bill impacts the growth of their business”.
Is there any help for SMEs?
While domestic consumers will receive a rebate of up to £350 this year, the Government are yet to announce any schemes to support businesses that will be struggling to meet the additional costs of energy bills on their businesses.
SMEs Energy Increase examples:
1. Twisted Empire Bakes energy increases by £90 per month.
2. Leamington Butchers forced to close site in the face of £24,000 per year rise in energy bills.
- Leamington Site from £1000 to now £3000. Warwick from £650 to just under £2000.
Reducing energy consumption will lower costs.
Business’ bills will likely be calculated based on a price per unit of energy used, by using less energy, you’ll pay less each year.
Contact us about reducing your energy costs by installing LED lighting. Our customers have seen over 70% reduction in energy costs just by replacing the lighting. Don’t wait for that unexpected bill, speak to us today.
Karndean Designflooring expect to achieve
80.53% energy savings with our LED lighting solutions
Sources: Financial Times - UK businesses face April ‘cliff edge’ as most pandemic support ends. This is MONEY - 'Surging energy prices keep me awake at night': Entrepreneurs reveal how soaring costs could have 'disastrous consequences'. The independent - Energy price cap rises due, but what other costs are set to go up? Coventry Live - Popular Leamington business shuts as it faces £24,000 increase in energy bills. Super Script - What can small businesses do about rising energy prices? inews - UK businesses face 250% gas bill increase as experts call for energy price cap to help SMEs