Energy price rise has a silver lining for businesses

British Gas has announced it is to hike household energy bills up by another 6% - which is surprisingly good news for businesses. No one likes a price hike - particularly one that is universally considered by all except the utility companies to be excessively greedy.

However, believe it or not, there is an element of good that comes from this situation.

In 2010, we were frustrated by the lack of any official figures for the number of businesses who regularly switch energy suppliers. So we conducted our own research among 500 SMEs. Alarmingly we found just 7% regularly switch energy suppliers. That's not to say more weren't trying - many were being prevented from switching because of the presence of controversial rollover contracts.

We repeated the research in 2011 and saw a marginal increase. Just last week, research conducted by Cornwall Energy for Consumer Focus found 16% of businesses regularly switch.

There's still a long way to go, but for the number of businesses actively switching providers to have more than doubled in a couple of years sends the message to the energy companies that higher prices drive customers away.

In other words: the market is working - certainly better than it was. Would we have witnessed this rise in proactive engagement from small businesses without the widely publicised price increases for domestic energy customers? I very much doubt it.

At our 100-seat call centre in Central London, we see a significant spike in enquiries from businesses every time energy prices hit the headlines. It's the nudge that a lot of business owners need to get on and do something they've been putting off for too long.

Business energy prices don't zig-zag as wildly as domestic prices. Instead they go up and down (mainly up) all the time, but by smaller amounts. In the last month, for example, we've seen two of the 'Big Six' energy providers actually decrease their energy prices by an average of 1.6%, while the other four raised theirs by an average of 4%. With business gas prices the average figure went up by 2.5%.

Would this be enough to make their businesses customers vote with their feet? Possibly, but far too few decision makers ever get to hear about business energy prices, as they are never published.

Also, the majority of businesses are in fixed-price contracts which provide some protection against incremental increases - at least until the contract comes up for renewal when any recent or predicted market movements will be reflected in the new price.

Anyway, back to the good news… Let's say that 1,000 additional businesses will contact us as result of the British Gas domestic price rise. We are likely to be able to help half of them either switch or re-negotiate their contracts at rates that might be 30% lower than their renewal - or rollover - offers.

With an average annual energy bill of £4,000, that's £780,000 we'll be redirecting from the dividends of the  energy companies over the coming year and adding it to the profit of smaller businesses who, arguably, need it more. Or to put that into terms that companies large and small would understand, it's enough to create 88 more apprenticeships.

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See how much you could cut off your utility bills by calling Make It Cheaper for a free consultation. It only takes minutes but could save your business thousands.  Click here  for more information.

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