Tips on Managing Rising Energy Costs for Businesses
As you’re probably very aware, energy prices are rising due to the global demand for energy. While the Government has announced support for households, there hasn’t been any new support for businesses.
In line with the inflated wholesale prices, Ofgem the energy regulator in the UK, is raising the price of household energy bills by 54% in April 2022. Unless global wholesale prices fall which seems very unlikely due to the current demand, this is expected to continue until October 2022.
What impact does raising energy costs have on businesses?
Many small businesses have started to feel the impacts of rising energy costs. Research suggests that more than half of businesses already spend £3,000 or more on their energy bills.
70% of small businesses believe that their ability to grow and expand has been impacted by energy bills and the price increase, leaving less capital for them to invest in productivity and growth.
What can your business do in response to energy prices rising?
Check with your energy provider to see what they can do
You may be able to arrange a payment plan to spread out the cost of your energy bill. It might be a good idea to create a budget or plan of what you can afford then contact your energy supplier to find out what support they can offer. That way, you already have a number in your mind of what you can afford each month.
Improve your business’ energy efficiency
There are some quick and easy changes that you can do at your business premises that can save you money:
- Switch any existing light bulbs to LED light bulbs
- Install sensors to ensure lights are off in rooms that aren’t being used
- Reduce the thermostat by 1 degree and create a schedule (e.g. have the heating off during the weekends and at night when no one is there).
- Turn computers off properly overnight instead of keeping them turned on or on sleep mode.
- Switch your windows to double or triple glazing
Consider switching energy suppliers
Another way that you can look to reduce your energy bill is to switch suppliers. There are no price caps in the commercial sector but energy suppliers often offer new customer discounts.
There are a few comparison sites that you can use such as MoneySupermarket and USwitch to find the best deal that’s available.
Invest in Green technology
Another option is to install green technology at your business premises. Installing green technology will allow you to produce your own energy to power your business. Solar panels, ground source heat pumpers and biomass boilers are a few examples of the green technology that you could install.
Even though Green Technology will have an upfront cost, in the long run, you’ll start to decrease your energy bills and could run your business with power that you’ve produced yourself.
Another benefit of Green technology is that it qualifies for the Government’s Super Deduction. The Super Deduction Allowance allows businesses to claim up to 130% capital allowance on qualifying plant and machinery until the end of March 2023.
An example of the Super-deduction in action:
- A company spending £100,000 on qualifying assets decides to claim the super-deduction
- Spending £100,000 on qualifying investments will mean the company can deduct £130,000 (130% of the initial investment) when computing its taxable profits
- Deducting £130,000 from taxable profits will save the company up to 19% of that – or £24,700 – on its corporation tax bill.
The rise in energy costs could be taking effect on your cashflow or preventing you from putting your growth and expansion plans into action. We can arrange finance facilities which can give you an injection of working capital to improve your cashflow or to help you expand your business.
We can arrange finance for businesses who are looking to add solar panels, ground source heat pumps, electric car charging points and more to their business.
An additional benefit is that Hire Purchase finance can be used when purchasing assets that qualify for the Super Deduction Allowance.