It’s been widely reported that the rising cost of energy will see bills soar this year and next, but it’s not just consumers that will be hit in the pocket – UK SMEs need to be braced for a serious increase in their monthly utility costs. Many businesses are already seeing it.
There isn’t one specific reason why costs are going up so fast, but it’s been reported that the price of wholesale gas has gone up by 250% since January 2020. A combination of factors including gas shortages across Europe, lower renewable energy generation and higher demand from Asia are all contributing to the problem.
Ofgem, the UK energy regulator, recently increased the domestic energy price cap to help suppliers recover money lost over the last 12 months. The price cap exists to control the cost of gas and electricity in the UK and limits the unit rate and standing charge that suppliers can bill for their default tariffs and it gets reviewed twice a year.
However, there is no such price cap for UK businesses. It leaves large and small companies very vulnerable to price increases and so far, the government has not agreed any measures to help, although it is expected that something will be announced this week.
Meanwhile, Industries have been left exposed to what Ofgem has called ‘unprecedented price rises of recent weeks’.
A BBC report summed up the current situation:
“Domestic customers have seen a rise in direct debit demands and bills from suppliers. They are, however, protected from the extreme cost of gas on the wholesale markets by the price cap. Businesses are not. Many are seeing instant and large increases in their energy bills.”
Heading into the busy winter period, the rising cost of energy presents a huge problem for businesses at a crucial time, with margins set to be squeezed and a huge amount of strain put on company cash flow in every sector. That’s on top of other factors, such as the rising cost of inflation, which could reach as much as 4 per cent by the end of the year according to the Bank of England, driven primarily by the cost of energy and goods.
