High energy costs holding back SMEs

While the the UK economy is experiencing a slight resurgence and small and medium sized businesses are steadily recovering from a tough few years, there are still a number of obstacles holding them back. One such impediment can be the cost of energy.

As one of the most essential expenditures for any business, it’s a factor that business owners cannot afford to ignore. With recent developments in the energy sector, many small business owners feel that they’ve been excluded from many of the positive changes benefiting other customers.

Following a great deal of media, public and regulatory pressure, all of the big energy providers operating in the UK have cut their prices. This has resulted in lower prices for customers across the country and has been welcomed as an important and positive development in the energy sector. However, these reductions in price have not applied to small businesses, most of which are still tied into much more expensive tariffs. Excluded and ignored by the big energy companies, it’s easy to see why many small business owners may feel that high energy costs are an unavoidable barrier to further growth.

The six largest energy providers, known as the Big Six, often operate as though small businesses won’t or can’t change their energy supplier once they’ve signed up. This lowers the quality of service SMEs receive and suggests large energy companies view them as second tier customers. For example, figures from the Federation of Small Businesses (FSB) show that only a fifth of all SMEs have been offered advice concerning their energy efficiency. The lack of support for business clients only serves to accentuate the frustration felt by business owners, already angry at the perceived injustice of higher energy costs.

In the process of surveying its members, the FSB discovered that nearly a third believe high energy costs to be a substantial barrier to growth and expansion. However, the importance of energy expenditures vary from industry to industry and some small businesses will be hit harder than others. Those businesses involved in energy intensive industries, such as the manufacturing, construction or IT industries, will continue to face difficulties if prices aren’t reduced in the future. If changes are to be made, industry regulators will play a vital role and any tariff reductions will be dependant on the extent to which they are willing to apply pressure on the Big Six.

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2 Comments

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