Small Business Gas and Energy
If you own or work at a small business, you’re probably aware of the problems that the rising cost of gas and energy are causing small businesses. Over 13 million people or around 58% of the UK workforce work for small businesses. (FSB) John Wright , chairman of the Federation of Small Businesses warns “Small businesses are reaching breaking point and if something is not done about rising fuel prices very quickly, then we will have a major economic crisis on our hands.” (Is4profit)
How are gas and energy costs affecting small business?
Most small businesses do not have large cash reserves to draw upon. In many cases, the business may consist of only one or two people. In fact, 95% of UK small businesses employ less than 5 people. (FSB) So, as a spokesman for independent energy watchdog Energywatch notes “Small businesses have a very small operating margin so every increase hurts.” (Telegraph)
Energy costs have now become the second largest expense for small businesses, exceeded only by staff wages.(New Business) A 2008 survey found that almost 20% of small businesses with 20 employees or less are now spending over 10% of annual turnover for energy. (This is Money) For individuals, spending more than 10% of annual income on energy is considered “Fuel poverty” so many small businesses would fall into this category.
Recently 80% of small businesses surveyed report that the rising gas and fuel costs have caused them to delay expansion plans for the next year and 40% are considering delays in hiring. (Is4profit)
In addition, small businesses are passing along increased costs to customers. A 2008 survey by Bibby Financial Services found that 52% were increasing prices in an attempt to deal with rising gas and energy costs. (Small Business) And there is no end in sight for increasing energy costs.
Experts predict gas prices may increase 40 to 70% in the foreseeable future. (London Stock Exchange) Eva Eisenschimmel of EDF says “Record world oil prices have continued to drive up wholesale gas prices. Alongside unprecedented rises in coal and electricity costs, this has impacted hugely on the cost of supplying energy…” (BBC News)
Why are gas prices hitting small businesses so hard?
Rising gas and fuel prices are affecting all customers, but small businesses are at a disadvantage compared to household consumers in that they are generally required to sign long-term contracts for gas and electricity. “Compared to households, small businesses get very little protection in the energy market.” (Small Business Energy)
While consumers may change gas suppliers in as little as 28 days, businesses may have to wait one or two years or longer to switch suppliers, when their contract is up for renewal. This forces them to pay the standard rate instead of being able to switch to a cheaper competitor.
And in some cases, business owners simply don’t have time to deal with utility contracts. Julian Morgan, co-founder of Energy Advice Line notes “Since the gas and electricity markets were deregulated, the number of options available to business customers has increased enormously and although many people are aware that there are potential savings to be made in switching supplier, the sheer volume of paperwork associated with switching can appear daunting.” (Energy Advice Line)
What can small businesses do to deal with rising gas costs?
There are some measures businesses can take to deal with high gas costs. The first thing to do would be to consider your current gas situation. Review your current gas contract and consider the following questions:
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What is your current rate?
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Can the rate change during your contract term? How long is the term?
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What happens when your contract expires? Does it automatically renew? At what rate?
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When is the renewal period? Will you be notified of this? By what means?
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What is the procedure for terminating service? Can you terminate the contract early? If so, are there penalties? (Small Business Energy)
Once you are familiar with your current situation, you can use the online comparison services to determine if you could save money by switching gas suppliers. There are several services specifically aimed at business customers that allow you to compare rates and plans from available suppliers in your area. You may want to check out Energy Advice Line or Business Advisory Service.
If you decide to switch suppliers, these sites can assist you with this as well.
Where can I find more information on comparing business gas suppliers?
If you want to know more about the choices available to you and details of how the switching process works, you can find information at the Small Business Energy site, which is run by the Federation of Small Businesses and Energywatch.
Energywatch, the government energy watchdog site also has useful information, but will only be available until October 2008, when it is scheduled to be disbanded. John Holbrow, FSB energy chairman notes “It is sad to see that the government is disbanding Energywatch at the very time when its work on behalf of small businesses is most needed.” Last year, Energywatch received over 30,000 calls from small businesses on gas or energy issues. (Usher Spiby)
Another helpful site is Energy Advice Line, which in addition to information also provides forms for termination notices and renewal notices, etc.
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