What challenges are businesses facing during the energy crisis?

UK businesses are being tested on several fronts right now. With rising interest rates, inflation, the ongoing cost-of-living crisis, supply chain issues, technology, and the pressing need to address emissions, leaders need mitigating strategies to ensure their businesses survive.

Ten-year predictions indicate that energy prices will continue to elevate, and this means that energy bills may continue to negatively impact UK business, so in this blog we explore:

• the impact of energy prices on businesses.
• what government support is available towards energy costs.
• ways to improve energy use at your business.

Energy prices are falling, but they still represent a significant challenge, and particularly for those on fixed contracts that won’t benefit from the drop in wholesale prices.

For some businesses, it’s make or break. The number of company insolvencies in April 2023 doubled for the same period in 2022, with 183 compulsory liquidations.

Looking ahead for the rest of 2023, 17% of trading businesses expect to raise the prices of goods or services they sell. More than a quarter (27%) of these businesses reported energy prices as a reason for considering these increases.

The Energy Bills Discount Scheme

The UK Government’s Energy Bills Discount Scheme runs until March 2024 and replaces the Energy Bill Relief Scheme. It will help businesses for 12 months with a £5.5bn support package.

Non-domestic energy customers, including businesses, schools, and charities, get a discount of:

• £6.97 per MWh (megawatt hour) for gas
• £19.61 per MWh for electricity

Energy suppliers will give this discount to customers directly, so if your business is eligible, you don’t need to apply for the scheme. This is a discount on wholesale prices rather than a fixed price.

If your business has energy costs below £107 per MWh for gas and £302 per MWh for electricity, you won’t get support under this scheme.

Discounts for energy and trade intensive businesses

There’s a larger discount for energy and trade intensive businesses with high energy use. This is because these types of businesses are unlikely to be able to pass on these extra costs to their customers.

This discount will only apply to 70% of the energy a business uses. There will be a maximum discount of:

• £40 per MWh for gas
• £89.1 per MWh for electricity

The threshold price, which is the price when the discount will be applied to these energy intensive businesses, will be:

• £99 per MWh for gas
• £185 per MWh for electricity

The wholesale price is currently lower than the UK Government price threshold, meaning most customers won’t see a discount under the new scheme. However, if the wholesale price increases above the UK Government price threshold, a discount will be applied to eligible customers bills.

You can find the wholesale price on the day you agreed your contract by visiting the UK Government website.

There are several ways you can help your business to save energy and money.

Improve energy efficiency in the workplace

According to research from the Department of Energy and Climate Change, the average small and medium size enterprise (SME) could reduce energy bills by 18-25% by installing energy efficiency measures and changing behaviour around energy use. This is especially true for offices and retail spaces.

A good place to start is an energy audit.

What’s an energy audit?

An energy audit is a detailed assessment of energy consumption of a business, building, equipment, or process and is the first step towards identifying opportunities to reduce energy consumption and thereby reduce energy bills and carbon footprint.

Under Article 8 of the European Energy Efficiency Directive, all member states were required to develop programmes encouraging SMEs to conduct energy audits.

Since the UK’s exit from the European Union, the UK is not required to follow the Energy Efficiency Directive. However, while the UK was a Member State, it implemented the Energy Saving Opportunities Scheme, to comply with the Article 8 requirements.

As part of our work with LEAP4SME, Energy Saving Trust have been researching standards and policies for best practice in this field, as well as looking at the barriers preventing SMEs from undertaking audits. You can read more about our work here:

Energy audit for SMEs

Here are some tips to help you improve energy efficiency in the workplace, including low and no cost actions, and advice for your employees that can really make a difference.

Businesses need more cohesive policy and more support during the energy crisis so that they can manage their energy use. Reducing a business’s energy use can help to bring down energy bills and reduce carbon emissions, which can also help accelerate the UK’s drive towards net zero.