Energy bills soar by up to 500% for small businesses 

Startling findings from a recent report by Energy Systems Catapult reveal that SMEs in the West Midlands are grappling with energy bill price hikes of 167-500%. 

Startling findings from a recent report by Energy Systems Catapult reveal that SMEs in the West Midlands are grappling with energy bill price hikes of 167-500%. The financial burden on these businesses is a growing concern

The report reveals that small and medium-sized enterprises (SMEs) in the West Midlands face 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 – found that of the businesses impacted by rising energy bills, 52% had experienced a negative impact on their profit margins.  

Business costs double overnight

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 MD, 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]”.  

SMEs are implementing measures to improve energy efficiency to regain control of their energy consumption and bills. 71% of businesses had conducted studies investigating 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.  

Areas of focus

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

Recently, gas and electricity prices have fallen below the baseline thresholds set by the EBDS, meaning that businesses may not benefit from the scheme.  

Furthermore, despite recent decreases, wholesale energy prices are still considerably higher than pre-COVID. If this remains the case, businesses will continue to feel the impact of high energy bills. 

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. 

Although all businesses felt that it was essential to do their bit to combat climate change, 71% identified cost as a barrier. Furthermore, 57% felt the UK government had insufficient financial support to help manufacturing businesses decarbonise.  

Posing a threat to businesses

Reace Edwards, the 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 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 understand better the energy challenges that our customers are facing and how our technology can help them navigate the current UK energy crisis”.