How the UK Energy Crisis is Affecting Small Businesses (and what they can do about it)

Business news and opinion

10 December 2021

With Winter racing to meet us and the UK continuing to experience the effects of the Oil and Gas shortage, small businesses may be high risk of big energy bills.  While a price cap safety net has been set by the government for consumers, businesses do not benefit from this. 

As such, small businesses could be affected by out of control costs this winter. Planning ahead could help minimise risk to your business, so check out our guide to handling the energy crisis and becoming more energy efficient: 

 
What Is the Energy Crisis?
 

According to ITV News, the wholesale cost of gas has risen by 250% since January and while this alone would normally be enough to affect energy prices, it's not the only issue at hand. The end of 2020 and start of 2021 were particularly cold and caused some early shortages across Europe, while low winds meant less energy created through renewable sources. 

Other regions of the world that we might have imported from have seen increased demand locally, so they've shipped less to Europe and a powerline that used to bring electricity from France into the UK was shut down due to a fire. 

Of course, the current staff shortages and supply chain issues only exacerbate the other problems at hand. All of this together has created a perfect storm of sorts and resulted in the energy crisis we're now seeing. 

As a result, many energy companies cannot afford to continue and more than 20 energy companies have gone bust this year alone. 
 

Should Small Businesses be Concerned? 

While the news has predominately focused on how this crisis will affect consumer bills come winter, less attention has been given to how businesses will cope with the rising costs of energy. 

Whilst the Government assures that there will be a "full energy supply", it is understandable that business who have already had nearly two difficult years of shutdowns and lost revenue might be nervous. 

While Ofgem is urging business and consumers alike not to worry about energy supply, there's less reassurance about the cost for businesses. If you're nervous about being able to pay your energy bills this winter here's a few steps you can take in advance: 

  • Be proactive if you're struggling to pay as there's often disconnection and reconnection fees when your energy supply is stopped 
  • See if your supplier would be willing to set up a payment plan 
  • If you already have a payment plan in place and are still struggling, contact your supplier to see if repayments can be paused or reduced 
  • Review your budget and see if there are areas where you can reduce cost and allow a bigger allowance for energy. Take a look at our guide to cost cutting if you need help with this exercise. 
  • Ensure you are giving frequent and accurate meter readings so that you are not being billed more than necessary.  

Citizens Advice says that 'if you're running a business from your home you won't normally need a business energy contract' so, while businesses often get better energy rates, remaining on a domestic energy supplier may give you more protection such as price caps that offices won't be able to take advantage of. 
 

What Happens if My Supplier Goes Bust? 

If your supplier goes into administration, Ofgem will assign you a new supplier and you'll be contacted in due course. Don't worry that your power is going to go out, the supply should be uninterrupted. 

However, if your provider is possibly going to go out of business, you should check and see if you are in credit with them. Businesses are not guaranteed to get this money back, so you should ensure you're never too far in credit with a supplier as that puts your money at risk. 

Citizens Advice suggests: don’t switch tariff or supplier until your account is moved to the new supplier. You might find it harder to get any money you’re owed if you switch before this happens. 

If you are, you may want to document this through past bills or statements so that you can try and get that money back. When you're given a new supplier, you can contact them to see if they'll be able to refund your old credit. Ofgem will try and give you a supplier that can refund at least some of your credit, but they cannot guarantee this, particularly with the volume of companies going bust at the moment. 

If your new provider is unable to credit you, you can contact the administrator for your old supplier. You'll get added to the list of the old company's creditors and as the administrator liquidates the company assets, they'll try and pay you back. There's a hierarchy in which creditors get paid back, so it's possible that by the time refunds reach you, the company may not be able to give you the full amount. 

This can be a drawn-out process, so you may not see that credit for a year or more. If you're too busy to stay on top of the process, you could see if a commercial claims company would take up your case, but they'll likely take a percentage of any payout you get. 
 

Should I Switch Suppliers? 

Right now, you may struggle to find good deals anywhere as every energy supplier is being affected by this crisis. That doesn't mean you shouldn't look though, just in case there's a deal available that you can take advantage of.  

If you're worried about energy prices continuing to rise, you may want to switch to a deal that has fixed rates instead of variable rates. That way your current prices is locked in for the duration of the deal, often that's a one- or two-year contract. 

There's quite a bit of research you'll need to do in order to decide if switching suppliers is right for you, but if you find a deal that fits your business needs better, find out the steps you'll need to take in order to switch: 
 

Guide to Switching Suppliers 

First, you should find out if you're locked into a contract and what the fees are for exiting it early. That answer may be enough to stop your search if the cost of switching is prohibitive. Even if you must stay with your current supplier, you should see if you can switch to a better tariff that they offer. 

If you're out of contract and able to look for a new supplier, it's worth getting quotes from as many suppliers as possible and comparing them. Look at things like how long the contract is for, if the price is fixed or variable, and how much you'll pay per unit of energy. 

Once you've found a new supplier whose contract you're happy with, you'll want to get switched over as soon as you can – but check first if your current supplier has a notice period so you don't end up paying a fee. 

Go Green for the Environment and Your Budget 

If you can't find a better deal, another way to try an minimise your bills is to make your business more energy efficient. Reducing your energy costs is always a great idea – both for your wallet and for the world. Not to mention, many customers enjoy supporting green businesses and a report from Deloitte says that about 50% of consumers are willing to pay more for environmentally friendly brands 

So if you're looking to become more energy efficient as a business, here's a few suggestions: 

  • Invest in Smart Thermostats: Equipment like this can learn the habits of the office, monitor weather, be controlled from a smartphone and sees energy savings usually between 15% - 25%. 
  • Insulate: Ensuring that no drafts are creeping into the building can help keep your heating costs down in the colder months 
  • Use the Blinds: By blocking direct heat in the summer, you can help keep the office cool and by allowing the full natural light in during winter, you can help heat the office – all without any energy usage. 
  • Better Bulbs: Fluorescent or LED lighting options are more energy efficient and don't need to be replaced as often as conventional light bulbs. According to Gazprom, LEDs use 75% less electricity than incandescent lighting and produce less carbon dioxide. 
  • Sensor Lights: Ensure lighting isn't left on in bathrooms and meeting rooms all day by using sensor lights that shut off when a room isn't in use. Gazprom also mentions that this measure reduces energy wastage by up to 30%. 
  • Power Down: At the end of each day, ensure that there aren't computers or other equipment left on overnight. Even equipment in standby mode can add up quickly on your energy bills. 
  • Efficient Equipment: Invest in office equipment that has an energy A+ rating so that you're using less electricity every day. Switch out for more efficient options where possible – for example laptops use about half as much energy as desktop computers. 
  • Flexible working: Allowing any employees to work from home or work in the office out with peak energy hours could help reduce your energy bill. 
  • Get Advice: The Energy Saving Trust can help you work out better energy efficiency measures for your business in case there's anything missed on this list! 

If you're really committed to going green, there may be an opportunity for tax breaks as well. Small businesses that don't use much energy may be able to pay a lower rate and business may be able to claim capital allowances on energy-efficient technology for your business. Find out more on the government website: https://www.gov.uk/green-taxes-and-reliefs.  

Get articles like this delivered direct to your inbox

Keep up-to-date with the latest news, information and advice from Business Guardian Angel with our free email newsletter.