British businesses struggling to find right solutions to cut energy costs, survey finds

New PwC survey underscores the tangible impact of escalating energy expenses on businesses.

This is according to a new survey of 750 UK organisations, conducted by PwC in November and December 2023.  The respondents included businesses from both the private and public sectors, operating across various industries.

The survey underscores the tangible impact of escalating energy expenses on businesses, with 77% of survey respondents indicating that they have had to raise the price of their products and services over the past two years due to energy-related expenditures.

Moreover, 81% anticipate further price hikes within the next two years, while 72% foresee negative repercussions on profits and 71% express concerns about diminished international competitiveness.

Despite receiving Government support, deemed indispensable for survival by a quarter of respondents, businesses continue to grapple with the formidable challenge of mitigating energy costs.

Last year, the Government announced new funding for businesses to help them manage the costs of their energy bills from April 2023 to March this year.

Moreover, as part of the Energy Bill Relief scheme, the Government has provided more than £7bn in funding to help businesses cover rising energy costs.

PwC UK’s sector leader for power and utilities Vicky Parker said: “Achieving predictable and controlled energy costs while eliminating carbon emissions is a multi-year transformation and will require long-term vision and leadership.

“Government support has provided a helpful and much-needed short-term buffer but has allowed transformational thinking to become less of a priority for businesses.

“Funding of this kind could impede wider economic growth – whilst in operation – and cannot be a permanent coping solution for volatile energy costs.”

Breakthroughs and barriers

Among the strategies employed by businesses to tackle the rising energy costs, 27% are focusing on reducing energy consumption, while an equal proportion is targeting carbon emissions reduction.

Additionally, initiatives such as reviewing energy procurement strategies (adopted by 37%), enhancing energy efficiency (adopted by 31%), and embracing corporate power purchase agreements (adopted by 34%) are being pursued.

However, pervasive gaps in understanding energy dynamics at the board level and across organisational hierarchies emerge as significant obstacles hampering progress.

Environmental considerations loom large among the challenges cited by respondents, with nearly two-thirds identifying them as top barriers to mitigating energy costs effectively.

Nearly 37% of businesses report that high energy expenses have delayed their efforts to decarbonise operations, while just 3% report accelerated progress in this regard.

Driving decarbonisation

The imperatives of energy security (highlighted by 61% of respondents) and regulatory compliance (cited by 58%) are emerging as primary drivers of decarbonisation endeavours, with regulatory factors anticipated to exert even greater influence in the foreseeable future.

In a business landscape characterised by escalating energy costs and intensifying environmental pressures, the imperative to strike a delicate balance between financial viability and ecological sustainability looms large.

Parker added: “UK organisations need to adopt a pathway that is right for them, noting that it will likely evolve as technology advances and markets change.

“But the prize is significant: greater competitiveness, greater resilience and greater control, all in a global economy where energy efficiency and carbon emissions become ever more important as an axis of competition.”