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Rising energy prices threaten businesses

Rising energy prices could force 300,000 businesses to shut according to Business Juice’s Business Energy Barometer.

30% of businesses say that say that if energy prices continue to rise by 15% a year it will have catastrophic or very serious consequences, with 7% of these (equivalent to over 300,000 companies) saying that it could force them to shut.

This shocking stat is just one of the findings of our latest Business Energy Barometer – a survey of 500 business leaders who are responsible for energy within their company. The Business Juice Business Energy Barometer aims to take the temperature of UK businesses and finds out which way the wind is blowing on a range of energy issues.

The survey shows that energy prices are a huge concern for businesses. 25% say that if energy prices rose by 9-10% they would do something about it, and over half of businesses would take action in response to prices rises of 10% or less.

But despite these acute worries about price, a significant number of businesses aren’t taking simple steps that will help them keep their bills at a manageable level. For example, a typical business switching from the highest electricity unit rate on the market to the lowest would be in line to save £6,665 a year, and yet 39% of businesses didn’t switch their energy supplier last year.

So why aren’t businesses switching? 22% said that while they’re aware of their bills, they don’t have the time or motivation to switch. These excuses don’t really stand up when you consider that between them, this segment are missing out on a collective £867 million in potential savings, and that whilst the market is far more complex than the domestic one, you can switch with a single five-minute phone call.

The percentage of businesses that say they would like to do something about their energy bills but find it so confusing that they don’t know where to start has increased from 26% to 30% since the last survey.

This could be the result of the growing disparity between the domestic and business markets. In the domestic market, people are starting to see changes which make the market a fairer place, for example, the government’s ‘historic agreement’ with the Big Six energy suppliers which means customers will get a letter from their supplier once a year to tell them what the best tariff for them is, or the introduction of annual statements which share key information about their energy tariff and usage.

Meanwhile businesses are still waiting to see the beneficial changes proposed in Ofgem’s Retail Market Review, and the proposed changes to the much-criticised CRC Energy Efficiency Scheme that are still under consultation.

In fact, the only real changes in the market of late have been as a result of energy suppliers and brokers taking action themselves, for example E.ON putting contract energy dates on bills as part of its Reset Review, or its introduction of the Third Party Intermediary Code of Practice.

Robert Buckley, Director of independent market intelligence business Cornwall Energy, commented: “Each respondent to the survey is responsible for business energy within their organisation, and most probably at home as well. With the number of changes made to the domestic market recently it is becoming simpler to manage energy bills in the home. Unfortunately, those same changes have not transferred to the commercial market, so it is understandable then that business energy continues to be a bit of a minefield when the two experiences differ so greatly.”

This confusion is also evidenced in the number of people who showed a lack of knowledge about key pieces of information in their business energy contract.

One in ten businesses is not sure of the exact date their energy contract is due to end, and one in five is not confident they know how much notice they need to give to cancel their contract.

This puts them at serious risk of being automatically rolled over to an uncompetitive energy tariff. Most worryingly of all, 4% of those polled are not confident that they know who their supplier is, despite the fact that they are responsible for making the decisions about energy in their company.

James Constant, Business Juice CEO, said: “The Barometer results clearly show that businesses need to start actively engaging in the market and paying attention to what is going on around them if they want to start dampening their concerns. Although they will never be able to control actual energy prices, they can certainly have some control over their bills, and this includes taking the time to research and switch suppliers.”

Another area where businesses could be doing more to cut their bills is energy efficiency. Many businesses are taking steps to cut their energy usage, but they could do more. For example, while over half of businesses have introduced or strengthened policies to save energy, and two thirds have energy-efficient lighting, 42% say they wouldn’t put a member of staff in charge of energy efficiency, and just 11% have an energy management system.

Another startling finding is that 22% of businesses said they would not consider installing a smart meter.

Lisa Waters, an Economist with Waters Wye Associates, commented:

“From a government perspective, the fact that one in five of businesses will currently not even consider installing a smart meter is bad news. This raises the question of why; is it because they don’t know what to do, or that they think it will incur costs? Whatever the reason, with the planned rollout, the government needs to do more to raise awareness of the technology and the benefits it can bring. A good starting point is Business Juice’s guide to smart metering.”

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