The energy price question: How changes to climate tax rules can benefit SMEs

posted on 25/11/2013 14:01:09 by Jonathan Elliott

Smaller suppliers could provide cheaper energy to businesses if they're made exempt from the Climate Change Levy

Generating support: Small businesses can benefit from Climate Change Levy reform

Energy bills have predictably increased this winter, and various public figures have proposed plans to tackle rising prices. It's a tough political issue - and of course it affects millions of UK households.

However, as is always the case during price rise season, the impact that soaring bills have on small businesses has been largely ignored. The clamour to cut costs has focused on the domestic sphere, with little mention of what can be done to ensure SMEs aren't paying over the odds for their gas and electricity.

Low expectations

Yet despite the lack of attention that small firms have been afforded by the media, their plight is just as important. Our research found that 40% of business owners believe the Chancellor should make energy costs his number one priority in the Autumn Statement, and 71% expect the government's current proposals to result in them paying even more by 2015.

Source: Make It Cheaper. Based on survey of 218 business owners.
We asked small business owners to highlight the issue they most want the Chancellor to address during the Autumn Statement. Here's how they responded:
Energy 39.4%
Business rates 20.2%
Petrol/Diesel costs 14.2%
VAT 11%
Employment 8.7%
Corporation Tax 3.2%
Water 3.2%

These figures make for disappointing reading and demonstrate why it's essential for SMEs to feel more empowered about lowering their rates. One of the first steps to improve this has to be to measure engagement in the market, while suppliers have to play their part by ensuring billing and contractual information is as clear as possible.

By addressing these issues we can increase businesses' understanding of their position and the options at their disposal - but there's still more to do in tackling rising bills.

Taking the next step

While politicians bicker over price freezes and one-off windfall taxes, much has been made of the impact that overhauling green levies could have on the cost of energy. This is somewhere I believe the business side of the industry can learn from the household market.

In the domestic space, homes that have their energy provided by suppliers with less than 250,000 customers are exempt from the ECO tax - a charge that bigger companies have to pay to help the UK meet its green targets. This exemption helps independent energy companies keep their charges lower as they do not have to pass ECO costs on to consumers, and also encourages people to switch away from the Big Six to secure cheaper bills.  

Such a model does not exist in the business sphere, meaning suppliers pass the cost of the Climate Change Levy on to their customers irrespective of their size. The only instance in which exceptions are made is if the energy being supplied has come from a renewable source.

Scrapping the levy

In a bid to boost SMEs, we've teamed up with the Forum of Private Business and called for this to change. We believe small business energy suppliers should be exempt from the Climate Change Levy (CCL) in the same way that independent domestic providers are, and have urged the government to take the appropriate action.

By allowing smaller gas and electricity companies to avoid the levy if their number of business customers is below a defined threshold, competition will increase and SMEs will be able to secure cheaper deals for their energy. 

Thousands of respondents to our survey report higher satisfaction levels if they're with suppliers outside of the Big Six - and by putting these providers in a strong position to compete, the market should start to work in favour of small businesses. Indeed, bills could be reduced by up to 5% if the CCL is removed.

The move would not prove universally popular with energy companies that are near the threshold - nor those that are currently exempt from the levy because they already provide renewable energy - but it would benefit SMEs, and that has to be the priority as Britain tries to build on its economic recovery.

Image credit: Leaflet

Jonathan Elliott

Jonathan Elliott is Make It Cheaper's CEO and founder. He recognises that small businesses are the lifeblood of the British economy, and is passionate about making it easy for them to save time and money, boost their profits and improve prospects for growth. As a vocal campaigner for fair treatment of SMEs by utility companies, Jonathan collected ‘SME Consumer Champion’ & ‘Most Trusted’ at the 2013 Energy Live Consultancy Awards.

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