Building of a lab testing heating technology
British businesses brace for soaring expenses. PAUL ELLIS/AFP

With the closure of the Energy Bills Relief Scheme businesses are bracing themselves for an impending surge in expenses.

The impact of this abrupt end to support is particularly daunting for the British hospitality sector, which is estimated to face an astounding £7.3 billion increase in energy costs in 2023. Disturbingly, over 150 pubs shut down in the first quarter of 2023, averaging nearly two closures every day, primarily due to the burden of exorbitant operational costs. The closure of 386 pubs in 2022 further adds to the growing concern that the industry's future may be overshadowed by a sense of gloom.

A recent poll conducted by Finbri among 843 British business owners reveals that 61 per cent of them expect their energy expenses to rise.

Cornwall Insight, a trusted source in the energy sector, warns that the combination of expiring fixed deals and the absence of government assistance could lead to a staggering surge of more than 133 per cent in company energy costs.

The gravity of the situation is eloquently described by Kate Nicholls, Chief Executive of UK Hospitality, who explains that the energy crisis has choked businesses over the past year, forcing thousands to shutter their doors and driving many others to take extreme measures in order to afford skyrocketing energy bills.

Unfortunately, the struggle with energy costs is not limited to a specific industry, size, or location. Businesses across the board face this challenge.

Additionally, Finbri, a prominent business bridging finance broker, emphasises the indisputable fact that energy prices are rising and will not decrease anytime soon. The past year has witnessed tremendous pressure on businesses, resulting in hundreds of closures. Moreover, as government assistance reaches its end and a new energy cost ceiling looms, businesses find themselves facing an uncertain future fraught with rising energy bills.

Beyond the energy crisis, British businesses are contending with other hurdles as well. A glaring issue is the persistent labour shortages, which have left 83 per cent of business owners concerned.

Recent research conducted by the Centre for European Reform (CER) and the UK in a Changing Europe claims that the British labour force is currently short by a staggering 330,000 individuals as a result of Brexit. The lodging and food services industry have been hit the hardest, with 35 per cent of enterprises reporting a shortage, closely followed by 21 per cent of construction companies.

In an attempt to mitigate the labour crisis, the chancellor proposed various initiatives in the Spring Budget aimed at facilitating businesses' access to the labour market and reintegrating thousands of people into the workforce. These measures are specifically designed to simplify the process for individuals with disabilities, long-term health conditions, parents, those in their 50s and older, and recipients of Universal Credit.

Apart from labour shortages, 71 per cent of business owners express concerns about supply chain problems and the potential impact on their industries. The Finbri poll highlights that manufacturing, retail, and wholesale sectors are particularly apprehensive about the challenges posed by supply chain disruptions.

Compounding these challenges is the lack of government assistance. Businesses whose energy expenses fall below £302 per MWh for electricity and £107 per MWh for gas do not qualify for the new Energy Bills Discount Scheme. This exacerbates the situation further, aggravating the effects of the termination of the Energy Bill Relief Scheme.

To combat these rising costs, Finbri suggests several energy cost-cutting tactics for businesses to consider. First on the list is switching energy providers, which can result in savings of up to 45 per cent on energy bills.

Comparing energy providers is a smart starting point for businesses looking to reduce overhead costs, particularly those with high energy consumption. Installing energy-saving equipment, such as smart thermostats and LED lighting, is another strategy to minimise energy usage and expenditure. Implementing energy-efficient practices throughout the business, such as using energy-efficient lighting, appliances, and computers, can significantly reduce energy consumption.

Businesses may also explore the option of negotiating with suppliers for better prices and terms. Finally, investing in renewable energy sources like solar, wind, and hydropower may help businesses reduce their carbon footprint and energy expenses.

The government has implemented the Energy Bills Discount Scheme (EBDS) to replace the Energy Bill Relief Scheme, running from April 2023 to March 2024. The EBDS offers energy bill discounts of £19.61 per MWh for electricity and £6.97 per MWh for gas, providing businesses with a £5.5 billion support package for the next 12 months.

Furthermore, the British government recommends various initiatives, such as installing heating and lighting timers, reducing boiler flow temperatures, and switching to energy-efficient light bulbs, to encourage the use of low-carbon technologies and help businesses manage their energy bills.

Despite the short-term relief offered by the Energy Bills Discount Scheme, businesses must be aware that their costs may increase once the 12-month period expires. The energy bill predicament will likely continue to be a major concern for British business owners due to the persistent rise in energy prices.