Businesses are already confronting a slew of new financial issues, including a significant increase in energy costs, having survived two among the most challenging and volatile commercial years in history. Your subsequent energy bill is most likely to be significantly higher, based on where you reside.
To deal with growing costs as well as inflation, one in four owners of small businesses have raised prices, and 30 percent have stated that they will be required to cut back on energy use to save money.
How can you tackle the rising cost of electricity if you’re a company owner or an employee? Well, read this article to find out more.
What Causes Energy Price Increases?
Energy costs rose in April 2022 as a result of Ofgem, the organization in charge of regulating the energy sector, raising the ceiling on residential energy bills by 54%. It is hardly unexpected that individuals are looking for strategies to combat rising energy prices, given the forecast for another big increase in October.
Even more troubling is that it may apply to corporations. Businesses that utilize industrial energy tariffs are not shielded from price limitations, unlike families, as well as tariff costs have been increasing as a result of the sharp increase in distributors’ energy prices. It was shown that while the average company saw a jump in costs of 250%, some businesses saw increases of up to 310%.
Why are the costs of wholesale energy rising so quickly? Prices have risen everywhere for a variety of causes, including:
- Winters in Europe in 2020–21 were unusually cold, which has limited supply worldwide.
- Due to the requirement for air conditioning during the hot weather in the East, especially in both China and Japan, this need has increased.
- The Ukraine conflict has restricted Russian gas exports.
How Does Increasing Business Costs Affect The Economy?
The bulk of approximately 99 percent of all UK organizations is small enterprises, which serve as the foundation of the country’s economy. The development of their company, according to 70 percent of SME owners, will be impacted by rising energy prices.
An increase in utility bills has a significant impact on overall business costs because between 5% as well as 20% of organizations’ total spending is allocated to energy.
According to data from the Office for National Statistics (ONS), 40% of small firms in the UK have less than three months’ worth of cash on hand to cover operating expenses. Business owners who barely made it through the COVID crisis should be concerned about this.
It is challenging to pass on rising operating costs to customers when inflation is at an all-time high. Larger companies and retail behemoths like Tesco have the opportunity to short- to medium-term cut smaller profit margins. Small firms, on the other hand, do not have the financial luxury of being a member of their local community.
By raising the pricing, they run the danger of alienating their clients. Additionally, it can place them at a disadvantage when competing with bigger enterprises, which might discourage customers from patronizing small ones.
Strategies for conserving energy
You can combat the rising cost of electricity by using the energy-saving advice we’ve compiled for businesses.
• Green energy suppliers
Ten percent of small firms have decided to go green to cut costs. Smaller businesses in the UK have lagged behind larger ones in terms of sustainability; many of them claim they lack the funds necessary to increase their sustainability or implement a carbon offset strategy.
However, small businesses are rethinking adopting sustainable providers in light of the rising cost of energy.
Agriculture, transportation, as well as the media, are some of the businesses that have hastened their ambitions to employ green energy sources.
Looking around for more affordable, environmentally friendly energy options will save business costs and benefit the environment. Check out the Business Energy Comparison website, as they can help you find the best cheap and sustainable deals.
• Calculator for energy efficiency
Your company can estimate its energy usage and then make an effort to reduce it to lower energy costs. If you’re having trouble figuring this out, Google “energy-saving calculator” might help.
This tool demonstrates how companies can reduce their energy usage. It gives an estimated amount they may save by making a few straightforward modifications.
Lighting, printers, air conditioning, and computers are the four main areas where a small business may cut costs and save £313 on their entire operating expenses.
• Use smart meters
Running a business can make it challenging to take meter readings, but merely doing so makes it tough to determine when and where you spend the most energy. A smart meter installation will provide you with more control.
You may optimize energy-intensive procedures and reduce wasted energy by using a smart meter, which allows you to know how much you’re spending on your company’s energy each day.
Smart meters will also make it easier to take manual meter readings and help you get more accurate bills.
Support from the federal government
You can qualify for federal assistance and programs like CitySwitch, an environmental initiative that helps office-based businesses increase their daily energy and waste management effectiveness.
This program offers members individualized assistance from a seasoned program manager intending to assist you in putting policies in place that enable your company to become carbon positive. Other initiatives for improving sustainability and incentives for research and development exist as well.
There is assistance available for your company if you are concerned about the rising cost of energy. To set up a payment plan that would assist stretch out your payments over a longer period, Ofgem advises small businesses that are having trouble paying their energy bills to speak directly with their provider.
Other than that, the UK government also offers a range of incentives and credit packages to companies trying to lower their energy costs, so it is not entirely terrible for businesses.