SME energy bills soar by up to 500%

  • Research conducted by Energy Systems Catapult on behalf of carbonTRACK found that West Midlands-based SMEs are contending with energy bill price rises of between 167-500%
  • More than half (52%) said that energy bill increases had negatively impacted their profit margins
  • 71% of businesses had carried out assessments of their energy consumption in a bid to drive down energy use

Small and medium-sized enterprises (SMEs) in the West Midlands are facing financial hardship due to rising inflation rates and unprecedented energy bill increases of between 167-500% according to the findings of research conducted by Energy Systems Catapult on behalf of carbonTRACK.

The research results – presented in the Back from the Brink: How SMEs are taking control of their energy management and why extra support is needed report – found that of the businesses impacted by rising energy bills, 52% had experienced a negative impact on their profit margins. The managing director of JCM Fine Joinery commented: “It’s been an utter shock, any business cost that more than doubles overnight without negotiation is always going to be difficult to swallow”.

To support non-domestic energy users, the UK government implemented the Energy Bills Discount Scheme (EBDS) in April 2023. 71% of businesses interviewed expressed concerns about the scheme; Businesses felt that they would not benefit due to the high thresholds proposed or that their energy bills would increase further due to the lower discounts available (in comparison to the former Energy Bill Relief Scheme).

Hinton Perry & Davenhill LTD’s Managing Director said: “The volatility that is present in the energy market at the moment makes it very difficult to know when to purchase and how to purchase [energy]”.

To take back control of their energy consumption and bills, SMEs are putting measures in place to improve energy efficiency. 71% of businesses had conducted their own studies to investigate on-site energy consumption, while 43% had engaged academic institutions to explore energy efficiency improvements. Solar energy is increasingly becoming an attractive option for SMEs looking to cut their bills with 86% of those surveyed investigating the potential for solar deployment.

Based on the findings of the interviews, the report draws attention to three key areas of focus for policymakers:

  1. Recently, gas and electricity prices have fallen below the baseline thresholds set by the EBDS, meaning that businesses may not benefit from the scheme at all. Furthermore, despite recent decreases, wholesale energy prices are still considerably higher than they were pre-COVID. If this remains the case, businesses will continue to feel the impact of high energy bills.
  2. Despite conducting energy consumption studies, some businesses felt that they needed access to more detailed energy consumption data to make informed decisions relating to energy management. It was reported that this would allow them to reduce energy costs and/or cut carbon emissions.
  3. Although all businesses felt that it was important to do their bit to combat climate change, 71% identified cost as a barrier. Furthermore, 57% felt that the UK government had not provided enough financial support to help manufacturing businesses to decarbonise.

Reace Edwards, Business Modelling Consultant at Energy Systems Catapult, said: “The West Midlands is a thriving hub of innovation and manufacturing excellence. Rising energy bills are increasingly posing a threat to businesses in the region as demonstrated by the interview findings. We are witnessing more and more SMEs looking to take back control of their bills by engaging with third parties, implementing internal energy management policies, or by deploying renewable generation technologies and energy efficiency improvements on site.

“The businesses we interviewed are however, looking to the government for more financial assistance to ensure they can weather the storm. Not only would this aid them in paying their bills, but it would make decarbonisation a cost-effective option for SMEs in our region. We cannot decarbonise while the cost of doing so for these businesses remains at a record high”.

Brenton Spear, Group Chief Executive Officer at CarbonTRACK, said: “Our collaboration with Energy Systems Catapult allowed us to better understand the energy challenges that our customers are facing and how our technology can help them navigate the current UK energy crisis”.

The study sought the views of West Midlands-based SMEs from a range of manufacturing subsectors to better understand:

  1. How difficult it has become to operate under current energy prices.
  2. What support has been made available.
  3. What actions businesses are taking to mitigate high energy bills and climate change.
  4. What extra support is required.

Back from the Brink: How SMEs are taking control of their energy management and why extra support is needed, is available to download.

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Back from the Brink: How SMEs are taking control of their energy management and why extra support is needed

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