A new report has found that the typical UK small business is spending over £5,000 more on its energy bills than it did pre-energy crisis.
Cornwall Insight’s Business Energy Cost Forecast looked at what business owners can expect in 2025 and beyond. Unfortunately for long-suffering UK companies, the forecast predicts further rises in energy costs as a result of external forces.
Russia’s invasion of Ukraine in 2022 caused problems almost overnight for the energy sector. With embargos placed on trading with the oil-rich Russians, gas supplies became scarce, and the cost of importing from elsewhere meant bills across the UK soared. Recent developments in Russia have heightened tensions further, with the result being another hike in wholesale prices that could push energy prices higher still.
Within Cornwall Insight’s forecast, it revealed that small businesses were typically paying around £7,000-£8,000 on their annual energy bills before 2021. That figure is predicted to increase to £13,264 for the average SME by April 2025, marking a 70% rise in just four years.
Luckily, this projected figure is actually a decrease from the peak experienced in the 2022-2023 period, which saw a typical SME’s annual bill reach the dizzying heights of £20,000. Despite current rates not quite eating into business reserves as much as they did then, they still remain high, and a worry for many business owners.
During the same period, the UK experienced huge swathes of corporate insolvencies too. Although there are other external factors at play that have contributed to this, it’s inevitable that the energy hike made things even more difficult for many companies. As such, the forecast’s findings will be a concern for many.
“Far from being sustainable”
Dr Craig Lowrey, Cornwall Insight’s principal consultant, commented on the report’s predictions, explain that “while prices may have settled from their peak crisis levels, they are far from being sustainable for the numerous smaller businesses already struggling in this economic climate.
For all the criticism of the household energy price cap, it does provide a level of protection that businesses simply do not have. Given the impact of the cost-of-living crisis on consumer spending and high street trade, the government will need to seriously consider how to support businesses with their high energy costs if they want to prevent further closures.
“The only way we are going to deliver sustainable lower energy bills is to deal with the problem art the source – the energy generation. This requires a strong governmental focus on boosting domestic production and reducing our exposure to international disruptions.”
The new government’s manifesto shared the same sentiment, and its plans of creating Great British Energy, a nationalised company aimed at producing and distributing domestic energy, will have to come to fruition soon. Of course, such ambitious changes will hardly happen overnight though, and business owners will be looking for some sort of support in the interim to help them stay afloat. With the autumn budget just around the corner, business owners will be hoping for a remedy to the price rises on the horizon.
Is your business finding its bills trickier to pay?
With insolvency still a very real threat for many SMEs, business owners should take action as soon as issues start to occur. If you’ve started to notice that bills are more difficult to pay, cash flow reserves are becoming stretched, or that takings are down, make sure you give one of our friendly specialists a ring.
With a range of solutions aimed at making life easier for business owners, Forbes Burton can help you to successfully navigate your current difficulties. Get in touch for a free consultation today to see how we can help. Call us on 0800 975 0380, or email [email protected] for your free consultation with no obligation.
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