Anyone who runs a business will have seen their business energy bills go up during the pandemic and continue relentlessly since then. A big part of the reason for this is that the much talked about Energy Price Cap only applies to domestic customers! There is no such cost cap for business customers (go figure), and anecdotal reports put some businesses at having a 4X or 5X increase in costs this Summer.
Since the announcement, many self-employed and small business owners have been worried about how they will afford their business energy bills if they keep increasing at the rate they have been. So here is a quick survival guide for keeping your costs as low as possible.
Why have energy prices gone up?
Before we go into what you can do to combat your rising business energy bills, it’s important to know why they have increased in the first place. Although the answer to this question isn’t an easy one; the rising energy prices are due to multiple factors:
- The war in Ukraine has caused issues with the supply of oil and gas from Russia. The Russia to Europe gas pipeline has reduced to just 20% capacity (as of mid-August 2022). This has put pressure across the energy market as scarcity of resources pushes the costs up.
- There is a high demand for natural gas in Asia, so more competition increases costs.
- A vital power cable used to import electricity from Europe to the UK was damaged in a fire in Kent – and it won’t be repaired until 2023!
Over the last 12 months, business energy bills have shot up by around 100% – which has been seen in an increase in out-of-contract or variable rates! Chris O’Shea, chief executive of British Gas owner Centrica, said we will have high gas costs for the next 18 to 24 months…so a 24-month fix might be the thing to get right now to prevent more increases in the coming winter!
Seven ways to reduce your business energy bills
While we could just wait and cross our fingers, hoping that the government will support small businesses soon, the best thing to do is to be proactive and control what we can right now. Here are seven things that you can do to reduce your costs in the immediate future:
1 Firstly, get on a fixed rate deal rather than suffer the ups and ups of variable costs– if you can find a fixed deal, that is! If you can’t, contact your supplier to try and arrange an energy payment plan.
2 If you are coming to the end of your current fixed price deal, it is often worth considering getting onto your next fixed rate deal early. If you can fix your costs before they go up over the winter, you should save overall! Of course, your new fixed rate will be more, possibly much more, than it was previously!
3 Fix your rates for longer! Do a 24-month rather than a 12-month contract. You can even get 60-month contracts! (Although taking a long contract might mean your bills will stay high if the rates come down.)
4 Understand your energy usage – consider installing a smart meter for your business. This can help you understand how you’re using your energy, so you can make impactful changes and only pay for the energy you use.
5 Improve energy efficiency – look for ways to reduce your energy usage, e.g. installing sensors that dim your lights in bright spaces or turning every device off at the end of each day. You can find funding to help your business become greener.
6 Check business finance schemes and grants – while nothing has been confirmed yet, there’s likely to be a Budget in the coming months where more support could be announced. According to a report in The Times, Chancellor Nadhim Zahawi said a package similar to the Covid-19 schemes could help businesses through the energy crisis. For now, if you run your business from home, you can check if you’re eligible for the Energy Bills Support Scheme.
7 You need to ensure you are looking at the numbers in your business and keeping high-profit margins – if you need to increase prices, do this sooner rather than later!
How can we help?
The government hasn’t done anything to help businesses – so business owners have to help themselves! If your business energy bills are going up, you have to keep on top of your numbers to ensure you’re making enough profit.
This is where we come in. Let us help you to be in control of your numbers, review your business profits and look at cost savings or price rises! We can give you the confidence and peace of mind that you can survive this period of craziness. Get in touch at [email protected]
