It’s no secret that we are all currently facing an energy crisis. Due to a perfect storm of events, which include extreme weather patterns and the war in Ukraine, the cost of energy has skyrocketed, leading to much higher bills. Staggeringly, the cost of wholesale gas has risen by over 275%, in a matter of months.
Of course, much of the focus has been on domestic energy and how normal people are going to afford these price hikes. However, this crisis affects everyone, including business owners. Considering that companies in the UK spend anywhere from 5% to 20% of their funds on energy, it’s clear that they’re going to be hit just as hard. This is particularly problematic for smaller businesses, who are going to feel the brunt of this crisis.
With all of this in mind, what are the main effects that the energy crisis will have on businesses?
Higher Bills
The increased cost of energy will lead to higher utility bills- it may be an obvious point but that doesn’t mean it’s not important. Businesses are already struggling due to the lingering effects of Brexit and Covid and higher costs is only going to make the situation worst.
Fortunately, there are methods which could help to combat this increase in costs. Of course, you can shop around in order to ensure you’re getting the best deal possible. Furthermore, if the bills are piling up, you can approach utility companies directly to discuss a potential payment plan. It’s worth noting that the government are providing help not just to domestic bill payers but also to businesses. This comes in the form of the Energy Bill Relief Scheme, which is running from October 2022 to March 2023 and provides an automatic discount to energy bills.
Difficult Recruitment
As the energy crisis is affecting everyone, this means it will also be putting pressure on workers. There will be a greater demand for higher paid jobs in order to ensure financial security. This means that businesses may find it more difficult to find staff. Similarly, there may be a difficulty in retaining employees, who could potentially leave in order to find a better paying position.
Of course the obvious solution to this problem is to increase wages, however this will only add to the ever growing costs. If a pay increase isn’t possible, business owners could look at other ways to improve their chances of hiring and retaining staff. You could make the position more attractive by offering extra benefits, whether that’s flexible hours, opportunities to work from home or stakes in the business itself.
Power Cuts
One of the grimmer forecasts facing all of us is the prospect of power cuts. As the suppliers struggle to provide consistent energy to customers, it’s likely that there will be periods where the lights are turned off. Whilst this is difficult enough for domestic users, it can be catastrophic for businesses. Whether it’s a disruption in manufacturing, communication or just a day away from the office, power cuts costs money.
Due to the unpredictable nature of power cuts, it’s difficult for business owners to plan ahead. However, there are some common sense solutions which could be helpful, should the worst happen. For example, storing candles and battery powered torches, just in case the lights go out. Businesses could also change the working schedule in order to operate during times when power cuts are less likely.
Supply Chain Issues
Another major aspect of business life that could be affected by the energy crisis is the supply chain. Suppliers are obviously businesses in themselves and will therefore face the same pressures from rising energy costs. Not to mention the effect all of this will have on delivery drivers, an industry that is already struggling to hold on to workers. Again, it’s difficult to protect yourself against potential supply chain issues but there are some ways to negate the impact, should the worst happen. For example, it’s a good idea to talk to your suppliers now, to ascertain what they are doing to prepare for potential power outages. Also, working with local suppliers, when possible, will shorten the supply chain and protect against longer downtime.
When running a business, there are so many unknowns to contend with and this energy crisis will only exacerbate this. Fortunately, there is help available. The team at Salhan Accountants offer expert budgeting and forecasting services, ensuring that when the worst happens, you’ll be ready.
