Almost half of UK businesses fear closure due to rising energy costs
Even with government support, close to half of UK businesses fear they may have to close due to rising energy bills, according to a NerdWallet survey. And consumers may suffer, with businesses forced to raise prices to cover costs.
Consumers and businesses alike have been hit by rising energy costs. And while we can already feel the squeeze on our household bills, what is shocking is to hear that close to half (45%) of businesses in the UK now fear that they may have to close as a direct result of the surging gas and electricity prices.
This is according to an NerdWallet’s exclusive survey of 500 business owners and senior level managers in the UK.
More than half of the businesses we spoke to felt that they had no choice but to pass these increases on to their customers; 43% had raised prices already, with another 8% planning to do so in the future.
While unavoidable, these price rises cannot help but perpetuate the vicious circle that is the cost of living crisis: struggling businesses pass on cost increases to already squeezed consumers, who then have less money to spend at those very same businesses.
The small business energy crisis: a Covid-scale problem
It is important to remember that, just like the cost of living crisis, this small business energy crisis isn’t happening in a vacuum. It comes after many organisations had their safety buffers stripped away by the Covid-19 pandemic.
But three in 10 business owners (30%) said that their business had actually struggled more financially in 2022 than at the peak of the Covid-19 pandemic.
Even if things are not worse now, the fact that 45% of those surveyed said their finances are ‘about the same’ as they were during the peak of the pandemic shows how businesses haven’t had the chance to rebuild their safety nets before lurching into another crisis.
» COMPARE: UK energy crisis explained
Is the government doing enough?
Criticised for not acting fast enough to tackle the energy crisis, on 21 September 2022, the government unveiled its Energy Bill Relief Scheme. Unlike domestic customers, until its launch on 1 October businesses had not been protected by any form of energy price cap.
The scheme discounts the price of wholesale electricity and gas, capping it at £211 per MWh and £75 per MWh respectively, for fixed-rate contracts signed on or after 1 April 2022 in Great Britain and 1 December 2021 in Northern Ireland, as well as for deemed, variable and flexible tariffs. This scheme will last for six months, from 1 October 2022 to 31 March 2023. There will be a review after three months in order to assess the most vulnerable industries, and decide what help, if any, will be provided after March 2023.
In reaction to news of the Energy Bill Relief Scheme,, just over half (54%) of the business owners and managers we spoke to said this support was enough for the short term, but were still concerned about what will happen once six months have passed. In general, 40% of those surveyed said that there is not enough support when it comes to businesses, and that the government needs to be doing much more.
When asked what support they would like to receive, 19% of those polled said they would want financial assistance to help install solar panels and increase access to other renewable business energy sources.
More than a quarter, meanwhile, wanted support in line with what was provided during the peak of the pandemic, whether in the guise of small business grants this winter (14%), or Bounce Back-style business loans (13%).
Perhaps unsurprisingly, when asked what the government should do to tackle rising energy prices specifically, nearly half (47%) backed increasing levies on oil and gas companies to cap profits.
» COMPARE: Business gas
What are businesses doing to stay afloat?
Of course, businesses cannot just sit by and wait for further government support. Alongside passing on costs to customers, the most common response to rising energy bills was reducing training and development budgets, with 43% of those surveyed saying they had cut spending in these two areas of their business.
Businesses have also had to reduce staffing levels. Almost two fifths (38%) had put a freeze on hiring, while a quarter had had to let existing staff go.
And it could be a miserable Christmas in offices up and down the country. Nearly half (49%) of businesses will either be stripping back their work Christmas party to save on costs, or won’t be having one at all.
What can you do to save on business energy?
While the Energy Bill Relief Scheme will discount the wholesale element of your business electricity or gas bills, you will still be paying a variety of fees and additional charges on top. These can vary greatly from supplier to supplier.
That is why it is still worth comparing business energy providers with NerdWallet. Make sure to look at all their costs, such as the standing charge, as this is where you may be able to save your business money.
If that seems daunting to do on your own, you may want to consider using the services of a business energy broker.
» COMPARE: Business energy
About the research
The survey was conducted by OnePoll on behalf of NerdWallet, polling 500 UK adults who own businesses or are senior level managers. Polling took place between 20 and 26 September 2022. OnePoll is an MRS Partners Company and its employees agree to adhere to the MRS Code of Conduct and MRS Company Partners Quality Commitment whilst undertaking research.
Image source: Getty Images
Connor is a writer and spokesperson for NerdWallet. Previously at Spreadex, his market commentary has been quoted in the likes of the BBC, The Guardian, Evening Standard, Reuters and The Independent. Read more