Energy Price Hikes Cause Havoc With Businesses by Louise Bateman
Business are facing lower growth prospects and are considering cutting the number of people they employ because of energy price increases, according to a new survey.
The vast majority – 83 per cent – of organisations say they will not meet business growth targets because of energy price hikes, according to the poll published today. A further 43 per cent said they would miss their 2013 targets by 10 per cent and more than half – 60 per cent – said they were now considering staff cuts because of the impact of rising energy costs.
Today’s survey by One Poll on behalf of energy saving consultancy Energy Works PLC was published as the National Audit Office (NAO) said that the UK could expect energy prices to outstrip inflation until at least 2030. It was conducted in October as some of the Big Six energy companies announced a new round of inflation-busting price increases.
“Unless we take urgent action it is clear that the economic prosperity the country is at risk,” Derek Duffill, ceo of Energy Works, said.
The Energy Works survey interviewed owners at 200 businesses across sectors such as finance, hospitality, property, construction, government and public services sectors. All had annual electricity bills of between £30,000 and £1 million.
Top barrier to business growth
Energy price increases are affecting the growth prospects of small businesses as well, according to the Federation of Small Business (FSB). Its 2013 third quarter ‘Voice of the Small Business Index’ reports that almost half (47.8 per cent) of its members consider utility prices as their top barrier to business growth.
In the last few weeks the big energy companies have announced price increases of between 3.6 per cent and 10.4 per cent.
The price rises come on top of major increases in energy costs for businesses in the last 12 months. Over that period, businesses have seen their gas prices and electricity prices increase by an average of 12 per cent and 13 per cent respectively, according to energy saving experts Make It Cheaper.
More price increases to come
“2014 is probably going to see them going up even more given the possibility of a 2015 price freeze and the gloomy forecast issued by the National Audit Office,” Make It Cheaper head of communications Nick Heath told GreenWise.
According to the NAO, the reason energy prices could keep rising ahead of inflation is because of a rising costs to upgrade Britain’s energy infrastructure.
But business energy bills are expected to also be impacted severally over the next two decades by Government policies to keep the lights on and emissions down. Analysis by the Department of Energy and Climate Change conducted in 2011 estimated energy and climate policies, such as the Carbon Reduction Commitment (CRC) Energy EfficiencyScheme, will on average add 19 per cent onto the bill of a UK business with a medium-sized energy consumption by 2020 – and 28 per cent by 2030.
“The UK is facing an energy deficit which makes it more susceptible to wholesale price rises on the international market. It is therefore absolutely vital that the UK looks at ways in which it can reduce its energy consumption and demand,” said Duffill.
Helping to cut energy costs
Energy Works provides help to business customers that are looking for energy saving ‘quick wins’ by upgrading to LED lighting – typically cutting their lighting costs by 20 to 30 per cent.
According to the Carbon Trust, large businesses that implement energy efficiency measures can achieve potential savings of around eight per cent. For the SME sector, where 7O per cent of energy costs relate to building services, like heating, lighting and air-conditioning, the average saving opportunity is 20 per cent.
Lighting now accounts for one fifth of all electricity used in the UK, according to the Carbon Trust, but EnergyWorks says 88 per cent of businesses are yet to make the transition to LED lights.