At this time of year it is common to hear news about how consumers are struggling to cope with rising gas and electricity bills but similar issues faced by small businesses, such as many UK grocers, are less commonly heard.
The problem is significant. Energy represents a substantial cost for the majority of grocers and yet the current market is failing them. Seventy per cent of smaller businesses experience difficulty comparing energy tariffs and 43 per cent say they have never switched supplier.
The Competition and Markets Authority (CMA), which is investigating the energy market, says SMEs in the UK pay around £500 million more a year than if competition was functioning effectively.
On the upside, at an individual business level there is much grocers can do themselves to reduce their gas and electricity bills. Many smaller businesses, however, either don’t believe they can make substantial savings or haven’t trusted the market and the system enough to engage in the process. This is precisely why we have just launched our new FSB Energy service, which could help members reduce their gas and electricity bills by around a quarter. Grocers, like other small business owners, want clear, easy to use advice on competitive rates for utilities and this service will go some way to achieving that.
Energy efficiency is another key method of reducing bills. Our research suggests that 90 per cent of businesses want to be energy efficient and 58 per cent have already made changes to improve their energy efficiency, which is good news because the impact of small changes can be significant when set against the cost of fuel. The Department of Energy and Climate Change (DECC) estimates that the average SME could reduce its energy bill by 18- 25 per cent by installing energy efficiency measures.
However, there are still major obstacles that need to be overcome. Operating from leased or rented premises is the most significant barrier, with over half of businesses citing this as a major problem because they feel they cannot make changes to their property. One solution to this, especially if tied to a long lease, is to discuss a potential cost share with the building owner. That way the capital outlay on energy efficiency improvements can be offset by energy savings costs over the duration of the contract.
Other barriers identified by business owners include a lack of concern around energy costs and a lack of capital for energy efficiency investment. There are a myriad of obstacles and negotiating them has not always made the reduction of energy bills an easy task for time-pressed business owners. However, with the right resources and advice, they should be able to make significant savings.
By Dave Stallon, FSB Energy