The recent rises in energy costs are no doubt worrying for households and businesses alike. There is little wiggle room in the energy market to seek cheaper suppliers. However there are some other ways to strengthen your business and manage business energy costs.
What Caused the High Energy Costs?
There are a number of factors that have led to the rise in energy costs. An unusually cold European winter in 2020-2021 plus a hot summer in Asia in 2021 caused a greater demand upon the global supply of energy. Additionally limits on Russian exports of gas, delays to the Nord Stream 2 pipeline and the conflict in Ukraine have all contributed to complications within the global energy market, causing a significant rise in wholesale energy prices, which is now unavoidably being passed onto business and domestic consumers worldwide.
How to Manage Business Energy Costs
There is no price cap for business energy deals, so it is difficult to predict exactly how much business energy costs will rise over the coming months. If you are currently on a fixed rate, you can expect to see rises when you renew. What you can do is mitigate these higher costs with good cash flow planning and saving costs elsewhere. First of all you need some data to work with. An in depth understanding of your energy consumption with an energy audit will help you analyse where you could be saving. There will be unavoidable costs for all businesses, because every industry needs energy to run. However an energy audit can be used to determine steps and approaches to reducing consumption and becoming more energy efficient, benefiting both your business costs and the environment. This may include use of more energy efficient equipment, training staff in energy efficient working practices or installing new energy generation technology. Where we can’t avoid business energy costs altogether, a green workplace strategy can at least help to manage the situation.
Improve Your Business’s Energy Efficiency
There are a number of small ways to improve your business’s energy efficiency. Updating materials and equipment to more energy efficient models can make improvements. This is where an energy audit can help you. Other ways to improve your energy efficiency may be making green habits company practice. Areas to further improve your energy efficiency could be lighting, temperature regulation and monitoring use of electrical appliances.
Improve Your Business’s Cost Efficiency
Further to improving your business’s energy efficiency you might be able to cut costs
elsewhere with green strategies. Areas for improvement could be water consumption or reminding staff to go paperless as much as possible. Depending on your business model you could potentially adjust production schedules to aim for sustainability as opposed to growth, whilst the energy market remains volatile. Some businesses have adopted hybrid working more permanently to reduce the cost of rental costs, sending more staff to work from home.
There are a number of business support schemes to help with the cost of switching to more energy efficient technologies which you may be able to access.
Free Energy Efficiency Audit
You may be eligible for a fully-funded energy efficiency audit and expert advice, as well as online resources and workshops. Schemes are offered regionally, so check what is available in your area. Some offer capital grants to contribute towards works undertaken to reduce greenhouse gas emissions and energy consumption, covering a percentage of upfront capital project costs.
Businesses can claim additional capital allowances when they buy energy efficient, or low or zero-carbon technology. Not only can this help your business’s energy efficiency, but it can also help to reduce your overall business tax bill and make further savings. An extension to the temporary increase in the Annual Investment Allowance (AIA) until 31st March 2023 offers 100% tax relief to businesses investing up to £1 million in qualifying expenditure.
Green Business Rate Exemptions
The Government has introduced green business rate exemptions which came into effect from 1st April 2022 to support the energy supply security. This was brought forward by a year to help businesses tackle rising energy costs. This exemption from business rates includes eligible plant and machinery used in onsite renewable energy generation and storage, typically solar panels, heat pumps, wind turbines and battery storage, as well as storage used with electric vehicle storage points. This exemption is due to remain in effect until 31st March 2035.
The cost of investing in new technologies could also be financed favourably by so,e funders. Some of the big banks offer ‘Green Loans’ and ‘Green Asset Finance’.
At Prestige Business Management we can help your Business
At Prestige Business Management we can help you understand and manage your business development and accounting. Find out what we can do for you. Call us today on 0203 773 2927.