Nine in 10 UK SMEs have reported hikes in their energy costs in 2023, with companies increasing their own prices and investing in their operations to help mitigate the impact, Paragon Bank research has found.
Paragon’s survey of more than 500 businesses, conducted on behalf of the bank by Opinium, found that, on average, companies experienced a 26.6% increase in their energy bill during the first three months of the year.
Four in 10 reported an increase of between 20% and 50%, with one in 10 recording an even larger energy bill hike.
The increase in energy costs reflects the broader inflationary pressure facing UK SMEs. Businesses reported an average cost increase for raw materials of 22.6% during the period, and 21.4% in the cost of new equipment and machinery. Additionally, employee salary costs were up 17.7% on average.
Businesses have implemented a range of measures to mitigate the energy cost increase. The most common action was to increase the price of their own goods or services, implemented by 54% of SMEs and being considered by a further 26%.
Companies have also invested in their own operations to make themselves more energy efficient – 38% of businesses said they have made investments in greener equipment, such as more energy efficient machinery, with 36% making changes to their premises, such as the installation of solar panels.
Other measures implemented by companies included encouraging more employees to work from home (27%), refinancing or extending loan terms on assets (20%), seeking new equity finance (21%) and taking out additional loans to fund the business (19%).
Conversely, SMEs said they had cut planned investment (33%), whilst one in five had reduced production output (19%).
John Phillipou, Paragon Bank SME Lending MD, said: “The cost of energy has negatively impacted the majority of business throughout the UK, even with the Government support package. Businesses have responded in several ways, with price increases being the most obvious way to mitigate the increase.
“However, it’s also positive that companies have been looking at ways they can reduce their energy bills by making themselves more efficient. We have seen businesses invest in their operations with the addition of more energy efficient equipment, whilst we have also funded changes to premises, such as the addition of solar panels. These are positive steps towards a greener future.”
