07/11/2014

By Michael Dent, Utilitywise


SMEs have all to gain in the energy market and beyond if they come together when it matters.

Small businesses are the backbone of the UK economy; it’s the collective mass of the smaller companies that has built the economy back from a few turbulent years. So, if they are so important to the UK, it strikes me as odd that they are often forgotten about by suppliers across different sectors. Due to their size, SMEs may be isolated in terms of their buying power in comparison when up against larger companies in the same market. When in fact we should be championing these smaller businesses and getting behind them to provide the best support.

In recent research of small businesses across the UK, we found that more than 2.5million owners and decision makers aren’t aware of what they spend on utilities, with less than a third (30%) being able to access energy consumption information. By not knowing what they are spending and what on, they are unable to assess where they can be saving – especially when small businesses admit that the rising price of utilities is the main source of cost inflation and a constant worry when they are balancing the books*. Our research was also telling in that, worryingly, 14% of small business owners – a sizeable 684,469 companies – have never actively reviewed their utilities expenditure, and so have never considered the possible deals and savings to be possible.

So, what can be done to give small businesses better deals across the board? One way of taking action is by backing a shared economy approach - using the collective buying power of different small businesses to get the same competitive deals as larger companies. This added ‘muscle power’ could potentially make small businesses more sustainable for the future – which is another fundamental issue playing on the minds of all of our small businesses across the UK. This strategy works for energy, but also across different sectors and purchases:

• By working with a trusted broker, you can buy resources and services as a collective, from energy to internet connection, to get the best deals
• You can better match your demands to supply from everyone from car hire companies to your utilities
• You can rent out underused office space or tools to other people and businesses who could use them
• By sharing services or physical spaces lots of businesses find they collaborate more, generate ideas and network effectively
• Small businesses coming together can create an effective business ‘voice’ in a region, sector or on a national level

Looking at energy, SMEs are in a poor position to leverage energy providers to offer the services they need, both when buying energy and to obtain services that help them reduce consumption. Our shared economy approach – we call it the Energy Alliance works by amalgamating many smaller businesses consumption into a large enough pot to allow the quantity to be traded on the wholesale market.

This will give SMEs the simplicity of a fixed energy price with all the advantages of buying energy flexibly on the wholesale market without any of the risks.

Energy prices are on the rise, and they are expected to keep on rising as demand increases and resources shorten. The collective approach to energy buying proposes huge potential for SMEs to manage their energy more effectively, and focus on a sustainable future. Across all business disciplines, we expect to see SMEs working together more and more, and would encourage this as a positive way forward in 2015 and beyond.

*Federation of Small Businesses Voice of Small Business Index Q1 2014