Why the cost of energy is a big issue for business

With almost a third of small firms citing energy costs as a barrier to success, find out how simple steps could help you be more efficient and save money

The cost of energy is a big issue for small businesses, with almost a third highlighting the cost of energy as a barrier to both the growth and the success of their business.

Improving your energy efficiency is an important way to reduce these costs over the long-term and it is something many small businesses are taking on board. FSB research reveals that nine out of 10 businesses want to be energy efficient and 58% have already made changes to improve their energy efficiency. The most widely reported energy efficiency measures that businesses have already introduced are the installation of more efficient lights, lamps and bulbs; the introduction of switch off/turn down policies; and improved insulation.

The effect can be significant. The Department of Energy and Climate Change (DECC) estimates that the average small business could reduce its energy bill by 18-25% simply by installing energy efficiency measures with an average payback of less than one and a half years.

There are, however, major barriers that still need to be overcome for many businesses. Operating from either leased or rented premises is the most significant of these, with over half of businesses citing this as a major obstacle preventing them embracing energy efficiency. Other barriers identified include a lack of concern around energy costs – when compared to juggling other business pressures – and a lack of capital for investing in energy efficiency measures.

Practical steps to reduce energy costs

Businesses looking to save money by being more energy efficient should consider the following simple steps:

  • Set heating timers to the right date and time, especially when the clocks change
  • Take different working times on weekends and bank holidays into account when setting heating timers
  • Set the heating in the office to a recommended 19 degrees centigrade
  • Seal up draughts and unused doors
  • Regularly check and maintain any air conditioning units and air filters
  • Make sure all lights are turned off when not needed, including in unoccupied areas
  • Ask staff to turn their computer monitors off if they are away from their desks for more than 10 minutes and that both PCs and monitors are turned off at the plug at the end of the day
  • Make sure all electrical equipment in kitchens are switched off at the plug at the end of the day

The wider energy market

Of course, a lack of energy efficiency isn’t the sole cause of high energy costs for businesses. Gas and electricity represent a substantial outgoing for the majority of small businesses and yet the current market is failing them. Many small businesses have either not looked into how to reduce their energy costs, or are simply not experienced enough in identifying areas where they can save money on their bills. Indeed, 70% of these businesses experience difficulty comparing energy tariffs and 43% say they have never switched supplier.

The Competition and Markets Authority (CMA) says small companies in the UK pay around £500m more a year than if competition was functioning effectively. It has expressed concerns that 45% of businesses have been placed on a default tariff, one that has not been actively negotiated, which can be more than twice as expensive as a negotiated tariff.


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Ensuring businesses secure the best tariff available is therefore another route to cutting energy costs. Many smaller businesses, however, either don’t believe they can make substantial savings, or haven’t trusted the market and the system enough to engage in the process.

This is why we have just launched our new FSB Energy service to help members reduce their gas and electricity bills. Members using the service could cut approximately a quarter (23% per cent) off their annual energy bill, which is equivalent to nearly £1,000 for the average FSB member.

Small business owners want clear, easy to use advice on competitive rates for utilities and this service will go some way to meeting this need.

To find out more about FSB Energy, visit www.fsb.org.uk/benefits.  

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