Small Businesses That Are Reopening Could Save £1,000 a Year on Energy Bills by Switching

Many UK businesses have not been trading for a number of months due to the coronavirus pandemic. As they start to open their doors once again to customers, owners will be looking at various ways to reduce costs to limit the damage the virus has had on productivity.

One of the smartest ways to cut expenses is by saving money on business energy bills, it is estimated that small firms overpay by an average of £289 per year for electricity. According to figures from Bulb, a domestic and commercial energy supplier. This is 12 percent of their average annual bill, in some scenarios, small companies risk overpaying by £1,000 a year.

The reason companies are overpaying for their business gas and electricity is because they could be finding it difficult to choose the right supplier, especially with hundreds of tariffs to select from, and expensive exit fees.

Comparing and switching business energy is a lot more complex than home energy. This is because business customers who are on fixed deals with the largest providers are charged the entire value of the contract if they want to terminate the agreement early.

This has prevented many smaller firms from switching to a more competitive deal, according to Bulb. A contract from one electricity provider stipulates that it does not allow early termination, and a move away to another supplier will even be blocked.

Commercial energy customers who do not explicitly inform their current supplier that they wish to leave once their existing fixed rate deal expires are normally moved over to a variable rate deal, some of these can cost twice as much as the cheapest deal available on the market. It’s not always easy to know what is the best deal available at any given moment, due to hundreds of tariffs with varying clauses.

Companies are offered up to 77 different deals when they request a quote, many larger energy suppliers offer firms 30 different tariffs to select from on average. These options need to be made clearer so customers aren’t left confused. In a bizarre move, one supplier offered eight separate tariffs that were all named ‘Fixed for Business,’ these all included a different pricing calculation.

Currently, around 80% of the UK’s business energy market is made up from the eight largest suppliers. This has meant that companies may face larger costs should they want to move away from their current deal. Most suppliers will require firms to pay off the full contracted amount should they decide to switch suppliers and leave early - with some even blocking the move.

The Competition and Markets Authority's investigation of the energy market found ‘a general lack of price transparency concerning the tariffs that are available to microbusinesses', along with an 'existence of incentives not to give non-domestic customers the best possible deal'.

Along with the pandemic, entrepreneurs already have enough challenges to contend with, they don’t need added costs during this time, especially when getting employees back to work will be a top priority for many.

Market share was calculated by using Elexon data for small businesses using figures for non-half hourly meters, which is the type of meter most SMEs use according to Ofgem.

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