Energy efficiency: Small businesses certainly don’t have money to burn
The UK’s largest small business organisation, the UK Federation of Small Businesses (FSB), is campaigning and lobbying to help small and microbusinesses to become more energy efficient. It’s an organisation with over 200,000 businesses and is concerned to help them to reduce emissions, become low carbon, grow employment and become more viable. We welcome the TUC’s report, Money to Burn, as a timely contribution to this key business issue.
As the chair of the FSB’s energy policy committee, I continue to express concern about the way in which successive governments have meddled with the energy market and regulators have ignored the needs of small businesses.
More than 99% of the 5m businesses in the UK employ fewer than 49 people. There are 3.5 million sole traders. Small and micro businesses are critical to the health of the UK economy. As the Cinderella of the economy, it’s only in the last couple of years after strong lobbying from the FSB that the needs of small and micro businesses need are starting to be recognised.
Most small businesses spend more than they need to. We need to help then reduce their energy bills: over half spend less than £3,000 on energy per year with a quarter spending between £1,000 and £1,999. On average, they spend £4,243 a year on energy.
Most small and micro businesses buy their energy like domestic consumers but without any of the benefits or protections: no published tariffs, no regulation about comparability of pricing, no protection from disconnection, outrageous up front deposits and unregulated brokers almost acting as the sales force for limited numbers of energy companies.
On energy efficiency, less than 20% of recently surveyed small and micro businesses say that their current supplier offers energy efficient advice. What most people don’t realise is that energy retailers are not obliged to offer energy efficient advice!
The focus on this and successive government has been misplaced. Switching supplier has been seen as the panacea through which competition will allow the market to work and we’ll all be showered with lower prices. We disagree.
Hitting our carbon emissions targets and keeping UK businesses profitable means recognising that reducing consumption is as important as energy price. Government and regulation is too focussed on switching, and the current Competition and Markets Authority investigation into the market is only looking at the market for the sale of energy. It’s important to remember that switching will save the average small and micro business only £50-£100 a year. So it’s a travesty, when energy efficiency can save a typical business £400-£800 in the first year just by behavioural change
So we need to change the fact that the energy companies are not required to provide energy efficiency advice, and to ensure that the next government is focussed on helping business to use less energy.
Access to capital and debt – after unaffordable business rates – is a further key concern for small and micro business. Lobbying the energy companies to offer energy efficient advice could be hand in glove with debt funding. The TUC report, Money to Burn, highlights the failure of both the Green Investment Bank and the Green Deal to offer help in this area. The report reinforces the fact that yet again we need to look to Germany and the Netherlands for better intervention models.-
In a recent survey, only 5% said that energy efficiency was an important factor in considering a new energy supplier. This reinforces the findings from the TUC study that regulation needs to be better. We don’t think that Ofgem needs to be abolished, just to be encouraged to listen more to member organisations and less to big business.
There is desperate need for better information and dissemination. We once had a perfectly good and effective Carbon Trust as an independent advisor to the business community. But politics demanded it be neutered. We’re now promised the Energy Efficiency Deployment Office one stop shop. Lets judge it on results and hope that it reaches the 1/7th of businesses that the TUC report tells us that Obama’s efforts have managed to do.
Some of the major retailers have recently announced that they were reducing prices. What few noticed was that the reductions were only for the domestic sectors. So it’s hardly surprising that more than 80% of our members think that energy companies don’t care about their business.
Businesses can be vulnerable as well as domestic consumers. Making our businesses more energy efficient must be central to the focus of both the next government and the regulator. The FSB is hoping to move into the energy market, with our offer including energy efficiency audits and access to finance to invest in energy efficiency. The TUC report offers a timely contribution to the energy efficiency debate.