How SMEs could potentially save £1.7 billion a year

By Ken Warner, MD, Energy Renewals

If I were to tell you small and medium-sized businesses up and down the country could save a collective £1.7 billion, you are likely to be flabbergasted before asking how and whether you could be putting some much needed cash on the bottom line.

UK SMEs currently spend over £7 billion a year on gas, but if they switched supplier they could well save up to £1.7 billion between them.

That’s staggering.

Rest assured, these are not my figures, but those of the Flogas Business Energy Report 2016, published last month.

The report also found that a third of businesses did not realise savings could be made by switching supplier.

A diverse range of businesses such as restaurants, warehouses, offices, shops and factories spend billions on their gas services each year, yet the report suggests the figure is 24.4% higher that it need be if companies switched to more favourable tariffs offered by other suppliers.

To put that into perspective, the report uses the example of an SME with an annual gas bill of £10,000 which would equate to a saving of around £2,400 by switching supplier or £200 per month.

Even when you drill down to the smaller numbers or look at it from an individual company perspective the savings which could be made are still significant.

Whilst 32% did not realise they could make savings by switching, for us, one of the most critical findings was that almost a quarter (23%) thought it would be too complex and time consuming to switch. In addition, almost one in ten (9%) said they couldn’t be bothered to switch and 13% said they intended to, but had not found the time to make the change. Interestingly, only 3% didn’t realise they could switch which shows most businesses are clued up despite not taking action.

The report also found regional differences with companies located in the North West wasting the most money with Yorkshire and Humberside and London businesses following next.

Yet this is exactly what we do on a regular basis for all our clients. We find the most competitive tariffs available at a given moment in time which means companies benefit from improved rates without having to manage the process themselves.

When businesses are constantly looking at ways to boost profits, identify revenue streams and cut costs, reducing energy bills is one of the easiest ways to put money back in the business and by using a third party, it doesn’t cost bosses money or put pressure on resources. If your business is among the 54% to highlight reducing energy costs as the best way to lower overheads, perhaps finding a third party to undertake on your behalf could be one of the most cost effective business decision you make this year.

Costs aside, the report also found a host of other issues identified by businesses including 24% citing international call centres, 28% spending too long on hold when calling their supplier, 17% confessed to not understanding their bills and 19% could not easily decipher the pricing structure.

By contrast, householders are becoming much more prolific in switching their energy suppliers with Energy UK reporting a three-year record high in October as consumers changed providers.

An incredible 53% more people switched suppliers in October compared to September with 577,810 customers signing up for new tariffs. It follows the launch of the Switch Guarantee in the summer. Signatories to the guarantee, which includes suppliers such as British Gas, Sainsbury’s, Eon and EDF Energy and currently make up around 70% of the energy market, guarantee to make changing suppliers quick and easy.

The findings follow a damning report by the Competition and Markets Authority found that a lack of competition still saw domestic users over paying by around £1.4bn annually from 2013 to 2015 . The same report estimated that from 2007-2014 microbusinesses paid about £180 million a year more than they would have done with a ‘well-functioning competitive market’.

Business can make some quick wins by simply switching tariffs or engaging a third party to identify the best contract on your behalf. Longer term wins can be made by implementing a strategy to reduce energy consumption.

Our advice is simple: switch supplier and count your savings.