5 ways SMEs can manage energy price rises
Read time : 5 mins Added: 01/08/2022
Energy bills are hitting many businesses hard but there are many ways leaders of small and medium-sized businesses (SMEs) can alleviate the pressures. Saving energy, and money, also often enhances sustainability both in terms of the environment and the ongoing financial health of businesses.
Recent increases in energy costs have hit households and businesses alike. While many of us will be worried about heating and lighting our homes, businesses are also feeling the pinch. Unlike consumers, business leaders can’t claim the £350 rebate on household energy bills announced by UK Chancellor of the Exchequer Rishi Sunak.
Factors relating to wholesale supply and infrastructure capacity are, largely, behind the challenges and led the Federation of Small Businesses (FSB) to say that energy costs are topping its members concerns and could be “an existential threat” to some SMEs.
So, what can be done to manage rising energy costs? Here are five suggestions:
1. Reduce existing bills
What you can’t measure, you can’t manage – or so says the well-respected business maxim – and it is important to keep costs under close review.
By checking your bills on a monthly basis, you will see the effect, if any, of changes made. Carbon Trust has a benchmarking energy tool for SMEs. Having adjusted the inputs to reflect the nature and size of your business, and outlined your existing energy costs, you’ll see an estimated energy profile for your site or premises.
So-called ‘smart’ meters improve access to base data and facilitate intelligent analysis of energy use and therefore costs.
According to a recent report by Green Alliance, the think tank, office buildings are shedding £60 million a year on unnecessary energy use. Energy currently wasted by fewer than 3,300 office buildings in Manchester, Bristol, Leeds, and Birmingham could power over 42,000 homes, it claims.
This suggests that there’s scope for savings among offices and factories across the country. Business leaders might want to start an energy saving campaign among staff: groups are likely to have more impact than individuals and may enhance team spirit. Encourage your teams to turn off lights and computers. Ask if the thermostats can be turned down: even a single degree can save significant amounts.
More and more energy efficient office equipment is becoming available too. Carbon Trust offers a guide and, whether you lease machines or buy them outright, now is the time to investigate the energy-saving options.
There’s energy and money to be saved reducing or sharing office space. The 2019 Coworker Members’ Choice Awards found that 77% of those surveyed said that they planned to open new locations. The growth of hybrid working, in many cases prompted by lockdown obligations and evolving communications technology, has led many businesses to reconsider their office space requirements. Shared and serviced offices – among other factors –can reduce many kinds of costs including energy bills.
Meanwhile, some SMEs may prefer to lock in a tariff for a fixed period so that they can better budget and manage cash while more energy-hungry businesses could consider energy price hedging.
2. Check out grants and loans
The Department of Business, Energy & Industrial Strategy (BEIS) has information about grants and loans made through local authorities to help with energy and other costs. Some SMEs in Scotland can apply to the Scottish Government for an interest-free, unsecured SME Loan of between £1,000 and £100,000 to pay for investment in energy efficiency. See the Business Energy Scotland website for details. Supported initiatives include LED lighting, energy efficient heating systems, and building insulation.
3. Switch energy supplier
Although energy cost increases are almost universal at the moment, it’s always a good idea to check to see if you can get a better deal from another supplier on a regular basis. According to the FSB, nearly half (43%) of SMEs have never changed energy company. With Uswitch for Business, for example, an expert will search a panel of suppliers on your behalf and communicate the results in a short phone call. USwitch for Business also offers to negotiate with suppliers on your behalf and manage any transfer.
Compare Money UK monitors more than 150 business energy tariffs and makes some exclusive rates available to clients. It claims it can reduce annual energy bills by more than £1000. Other business energy comparison sites include SwitchPal and Business Energy UK.
4. Invest for the longer term
Lighting accounts for 15% of a typical household’s electricity bill: you can save £2 to £3 a year replacing a traditional halogen bulb with a similarly bright LED equivalent according to Energy Saving Trust. The Trust says the upfront cost of fitting LED bulbs would cost the average UK household about £100 but reduces annual bills by £40 a year.
In some cases, it may make sense to fit solar panels, heat pumps, or even small wind-turbines. The Renewable Energy Hub has details about the wide range of such products and information on grants that may be available.
5. Seek help if you are struggling
If you’re finding it difficult to pay your energy bill, contact your supplier and explain the situation. If you don’t pay your bill you might be disconnected and, as well as the resulting disruption, you may incur a reconnection fee. Most energy companies are usually willing to negotiate a payment plan.
Business Debtline, a charity run by the Money Advice Trust, can help if your company is finding it hard to meet your outgoings while Citizens Advice is another important source of assistance. See this webpage for details.
As businesses come out of the pandemic and struggle with staff shortages and broken supply chains, many are particularly vulnerable to soaring energy costs. However, by refusing to panic and by taking practical short-term action while considering a longer-term strategy to meet this continuing challenge, forward-thinking SMEs can emerge from this challenge with lower costs, greater resilience, and better sustainability.
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