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Rising energy costs prompt small firms to go green

31 May 2022

More than one in ten small businesses are bringing forward plans to become more sustainable as a way to reduce their energy costs, according to a new survey.

Soaring energy prices have forced 89% of small businesses to review their energy use, according to research from Novuna Business Finance; many small firms are looking to invest in more sustainable energy solutions as a result.

Until now, smaller enterprises have been trailing behind larger firms on sustainability - with less than half of UK small businesses having a carbon offset plan in place (45%) and 24% saying they don't have the budget to invest in becoming more sustainable. However, it seems that soaring energy prices are encouraging many small businesses to think again on green energy.

Novuna Business Finance polled 1,027 small business owners and asked them how rising prices had impacted the way in which they buy and use energy. The findings show that:

  • 37% of small business owners are shopping around for cheaper energy deals;
  • 34% of respondents are more closely monitoring their energy usage as a business;
  • 29% are already attempting to use less energy.

The findings also reveal that 12% of small businesses across the UK (and 18% in Scotland) have now accelerated their plans to use green, renewable energy options. Small businesses in transport, agriculture and the media are most likely to be moving into renewables on the back of soaring energy costs.

Looking at the impact of rising energy prices on the supply chain, 22% of small businesses say they will pass rising energy costs on to their customers. Construction (35%) and hospitality (37%) are the sectors where small businesses are most likely to pass on rising energy prices to their customers.

Jo Morris, head of insight at Novuna Business Finance, said: "Small businesses have adapted quickly and decisively [to rising prices], with many shopping around for cheaper suppliers or putting in plans to reduce their energy usage. Coupled with many business leaders looking more seriously at renewable energy options, the energy price crisis has arguably been the catalyst needed - encouraging more small businesses to adopt sustainable practices that will help protect the planet.”

Reducing energy usage

Utility Bidder has developed a tool which shows small firms how they can cut costs across their energy consumption. Recent figures show that the average electricity bill annually for a micro-business is £1,834, for small businesses it is £3,468 and for medium-sized businesses it is £6,705.

The tool allows business owners to find their current energy consumption, along with an estimated number of savings they could make by making some simple changes. Utility Bidder tested the potential savings based on making changes in four key areas (computers, lighting, printers and air conditioning) and found that, on average, a micro-business could save £130, a small business could save £313 and a medium-sized business could save £1,261.

Businesses at risk

Rising costs have been described as “ticking timebomb” for UK small business owners by Martin McTague, chairman of the Federation of Small Businesses (FSB). He told BBC Radio 4’s Today programme this week that almost half a million firms are at risk of going bust within weeks without a fresh wave of government support.

“We don’t have any problem with the way the chancellor dealt with consumer needs,” said McTague. “But there is still a massive problem with small businesses. They are facing something like twice the rate of inflation for their production prices, and it’s a ticking timebomb. They have got literally weeks left before they run out of cash and that will mean hundreds of thousands of businesses, and lots of people losing their jobs.”

New statistics from the Office for National Statistics (ONS) show that 40% of the UK’s small businesses (two million SMEs) have less than three months’ worth of cash left to support their operations. “The chancellor spent approximately £45bn making sure those businesses survive the COVID crisis,” said McTague. “Are we seriously expecting him now to abandon them just as they’ve managed to get through one crisis and effectively lose that money for the taxpayer?”

Written by Rachel Miller.

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