The true cost of energy: How can UK SMEs future-proof their business?

. 70% of SME owners see rising energy costs as a barrier to business growth

. More than half (54%) of UK SMEs are spending £3,000 or more on annual energy bills

. SMEs account for 99.9% of the UK’s business population but not all are able to adopt sustainable measures

. Financial concerns and lack of time or information cited as reasons why

As COP26 ends, 2,000 SMEs in the UK have joined the UN Race to Zero, but are all UK SMEs in the position to invest in a more sustainable future? Tyl by Natwest surveyed 500 UK SME owners to find out more about their current energy spend, as well as their ability and desire to invest in sustainable alternatives to future-proof their business.

Energy costs are continuing to rise – as of September 2021 more than half of UK SMEs are spending £3,000 or more on annual energy bills. Average annual spend on energy bills is highest among businesses based in Yorkshire and the Humber, at over £5,000 per year.

     

These spends are having a significant impact on small businesses and their overall costs. 65% of SMEs are spending up to one fifth (0-20%) of their total business costs on energy consumption, while 8% of SMEs are spending a whopping 35-50% of their total business costs.

Subsequently, energy bills are affecting long-term business operations according to SME owners across the UK. 70% believe that the cost of their energy bill impacts the growth of their business –

this was highest among businesses in the East Midlands (78%).

Tyl’s research found that SME owners face several barriers when it comes to implementing sustainable changes, due to rising energy bills. Adopting effective energy-saving measures can help cut costs for small businesses – however, 50% of SME business owners agreed that they could improve on the energy efficiency measures they currently have in place. Tyl asked SME owners what’s holding them back:

31% of business owners do not have enough time to enforce more sustainable measures

24% of business owners are not in a financial position to consider further energy saving efforts

31% of SME owners do not have enough information on the potential measures they could take

37% of SME owners are unaware of the support they’re entitled to from the government

Fortunately, 72% of small business owners are currently adopting energy efficiency measures within the workplace. Popular sustainability practices among small businesses include:

Using energy efficient LED lightbulbs (40%)

Turning off production equipment at the end of each working day (38%)

Using smart meter to review energy usage (34%)

Whether big or small, making such energy-efficient changes can reap tangible benefits for a small business. Almost a fifth (19%) of businesses are saving between £2,000 and £3,000 a year through energy efficient measures, while 35% are saving between £1,000 and £1,999. In a time when energy costs are on the rise, SMEs could really benefit from such savings.

Mike Elliff, CEO of Tyl comments:

‘It’s clear that SMEs across the UK are finding the cost of energy a barrier to the growth of their business. Improving energy efficiency in the workplace can be the most effective way to reduce these costs, whilst also playing a key role in the UK’s journey to net zero. 50% of the business owners Tyl spoke to know that they can improve on the sustainable measures they have in place, but financial concerns and lack of information are holding them back. Small firms require more support and information on the ways they can make savings and implement initiatives’