The no-brainer-est way of reudcing business costs in the UK

When talking about business operations, energy supply is a crucial but often overlooked aspect. Businesses are worried about their market share, customer retention, or even worrying about their Christmas bonuses, but often forget to be stringent with their overheads, including their recurrent energy bills.

It's as if they didn't understand that the UK's energy market --unlike some parts of the world where energy is a state-managed monopoly-- operates on a competitive model where businesses can take full advantage of suppliers fighting amongst themselves to supply your business with energy, both as gas and electricity.

In this short article, we're going to explain to you WHY appointing someone at your company to look at utility bills can save you significantly more than that your business invests!

Step 1: How the energy market works

To appreciate the importance of periodically re-evaluating your business energy supplier, it’s essential to understand how the UK energy market functions.

Unlike countries with a state-managed monopoly, where a single entity controls the entire energy process from generation to billing, the UK's energy sector is divided into several segments: generation, distribution, and supply.

Suppliers in the UK energy market are not the ones generating or distributing electricity or gas. Instead, they serve as the front-end interface for businesses – managing accounts, billing, and customer service. They're the liaison between the complex world of energy production and distribution and the everyday business owner.

💡 You don't need to understand any of the technical aspects of energy. Just use your negotiating skills and a business energy comparison website and get a deal just like you would negotiating in a Moroccan medina.

The role of energy suppliers

Suppliers play a vital role in this market. They purchase energy from generators, secure transmission via the national grid, and sell it to consumers, both residential and business.

The diversity of suppliers in the UK market means that businesses are not stuck with a one-size-fits-all approach. Instead, they have the freedom to choose a supplier that best fits their needs, whether it be in terms of price, customer service, or green energy options.

💡 Chose between Octopus, EDF, British Gas, etc. Often, generators will also have their supplier arm, although these will act independently of each other.

Step 2: Compare the market

For businesses, engaging in regular market research to assess energy suppliers is crucial.

Typically, energy contracts for businesses last around two years, so it's not even something that needs to be done ALL the time. The duration of this window of opportunity for businesses is ample in order to reassess their energy needs and market offerings.

This is just the same as individuals routinely comparing mobile network providers or switch their ISAs for better returns.

💡 Businesses should adopt the same mindset towards their energy suppliers. While thousands participate in Reddit's 'Personal Finances' sub, only a fraction of businesses regularly switch or even compare the energy market, losing millions of dollars in the process.

Personal Vs. Business Energy Switching

There's a common practice among individuals to routinely switch service providers for personal gain. Whether it's hunting for a better mobile plan or shifting investments for better yields, this practice is ingrained in personal finance management.

The same principle applies to businesses with energy suppliers. It's about maximising value, ensuring that your business is not overpaying for energy, and aligning your energy needs with the most beneficial supplier in the market.

Come on! It's such a no-brainer!

Perhaps the most compelling reason to periodically reassess your energy supplier is the potential for cost savings.

Energy costs can be a significant part of a business's overheads, especially for those offices where people just leave their PCs ON all night.

By actively engaging in the market, businesses can negotiate better rates, take advantage of promotional offers, or switch to suppliers who provide more competitive pricing structures.

This research and switching process might seem daunting, but the financial savings can be substantial – directly impacting the bottom line. So little effort is required that we're really surprised that businesses are not aware.

💡 While energy is typically the largest business cost, the water, broadband and waste collections markets are also competitive in the UK. To our surprise, conversion rates of these utilities can be as low as 30%, with most businesses continuing with their default business rates.

Some final words

Most businesses are foolish when it comes to their utilities, don't be one of them!!!