A growing number of businesses are becoming increasingly concerned over rising and volatile energy costs. Several business owners in the UK say these prices are undermining their ability to grow, invest, and remain competitive. New research reveals that 62% of UK companies report that escalating energy prices are already impacting profitability and competitiveness, with 66% also expressing concern about the reliability and availability of energy supply in the future.
Energy costs: A barrier to growth
While 70% of UK businesses say they have a comprehensive energy strategy, 44% cite financing costs as a major barrier to implementation. Additionally, 35% point to complex regulation and limited infrastructure as further obstacles.
These challenges are particularly acute for energy-intensive industries. For example, Dunoon Mugs, a Staffordshire-based ceramics company, has seen its energy bills increase sixfold since 2022, leading to a 20% reduction in its workforce. The ceramics sector, known for its high energy consumption, is calling for government assistance, including a temporary suspension of emissions penalties.
Rising Demand Meets Rising Costs
Compounding the issue, energy demand among UK businesses is on the rise. According to PwC, 89% of UK businesses increased their energy consumption in the past year, and 83% anticipate further increases in 2025. This surge is driven by the adoption of energy-intensive technologies such as AI, automation, and electrification.
However, the high costs associated with these technologies are a significant barrier. Businesses are striving to balance the need for innovation with the imperative to manage energy expenses.
Government Response and Industrial Strategy
In response to these concerns, the UK government is developing a new industrial strategy aimed at addressing the country's high energy costs, which significantly disadvantage British industry compared to competitors in the US, China, and Germany. The strategy, set to be released in June, will focus on eight key sectors, including advanced manufacturing and clean energy. Proposals under discussion include further reducing network charges for industrial energy users.
Despite these efforts, scepticism remains among industry leaders about the potential impact of the strategy. Some express concerns that without substantial changes, UK businesses will continue to face a competitive disadvantage due to high energy costs.
The Road Ahead: Innovation and Adaptation
Despite the challenges, UK businesses are taking proactive steps to mitigate energy costs. Over two-thirds (69%) plan to increase investment in electrifying operations, lowering emissions, and reducing energy costs in the next three years. Additionally, more than two-thirds (68%) of businesses want artificial intelligence integrated into their energy experience and interactions.
As energy costs continue to pose a significant challenge, UK businesses are seeking innovative solutions to ensure sustainable growth. The coming years will be critical in determining how effectively these strategies can be implemented to overcome the energy cost barrier.
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