Energy crisis and what it means for your business

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If you’re reading this, it’s likely that you’ve been following the news about the UK energy crisis. There is a lot happening in the energy market with countless suppliers going into administration, supplies are not normal and prices are going up, then we have discussions on COP26 and carbon emissions and others suggesting the energy sector shouldn’t be privatised!

The focus of our article however is supplies and the price increases and what this means for your small business? The impact will vary from situation to situation and will depend on your industry, how much energy your business needs to generate its products or provide its services in addition to its dependency upon it.

 

What started the crisis?

There are multiple factors leading to the UK energy market crisis. It’s been reported that global gas demand has reached an all-time high this year as we come out of Covid-19 lockdowns and economies resume. This together with the cold winter which left storage levels depleted has contributed towards prices to skyrocket – the wholesale prices went from 48.29/GBp in February 2021 to 112.52/GBp in October according to Ofgem – the change is illustrated below.

Date Price
01-02-2021 48.29
01-03-2021 46.42
05-04-2021 52.55
03-05-2021 62.48
07-06-2021 68.47
05-07-2021 84.32
02-08-2021 64.39
06-09-2021 80.25
04-10-2021 115.03

Gas Prices: Forward Delivery Contracts – p/therm (GBp) – (Source: Ofgem)

 

What are the implications for small businesses?

According to the Federation of Small Businesses (FSB), there were 5.5 million small businesses at the start of 2021, accounting for 99.2% of the business population.

Energy prices for small businesses as with households will increase, what is notable though is that small businesses are not included in Ofgem’s price cap as that’s limited to household bills only! It has been speculated that suppliers may even roll businesses over onto out-of-contract rates with the intent of offsetting losses from the wholesale energy prices.

A further concern for businesses is what happens to their supply if their supplier goes into administration? A UK government spokesperson responded to this concern saying, “All energy customers, no matter who their supplier is, can rest assured that even if their supplier fails, there is a robust and well-rehearsed process in place to ensure continuity of supply.”

If you have concerns, the Commercial Utility Consultant team are happy to provide advice and even provide a bill review to ensure you are on the best tariff.

 

What should be your next steps?

Firstly, we’d suggest checking when your contract finishes so you safeguard yourself from rolling into out-of-contract dates by planning ahead and exploring options with a commercial utility broker such as ourselves who can advise whether the remaining contract period can be bought out and what tariff rates, contract terms and lengths are available for you.

Thereafter we could advise conducting an energy audit and exploring ways how to reduce energy consumption. There are lots of things a business can do to achieve this including using LED lighting over existing halogen lighting, reducing heat loss through better insulation, using smart meters to better manage usage and where possible even allowing staff to work from home! In upcoming articles, we will share more on how to reduce energy costs.

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