BLOG - 02 December 2019
How to Brexit-proof your business’s energy tariff
By Sonia Older
The UK imports a large amount of energy from Europe. Brexit is destined to affect every part of our lives and our businesses, and your company’s energy supply is no exception. When looking to renew business energy tariffs switched-on organisations will have to take Brexit into account.
By leaving the EU Internal Energy Market we will have to regulate our own market, leading to uncertainty over commitments to renewable energy, competition and accountability. And because over 47% of the British gas supply* and 6.6% of electricity** comes from within Europe, we can surely expect energy costs after Brexit to increase. Even the leaked ‘Yellowhammer’ document, that outlined the worst-case scenario of a no-deal Brexit, admitted that there would be ‘significant’ price increases for consumers and businesses.
Why will Brexit cause energy prices to rise?
·Increased cost in transportation: We are currently one of the least connected countries in Europe. Our increasing reliance on ‘interconnectors’ between us and neighbouring countries will leave us exposed as the EU no longer has a joint responsibility to maintain them. They will be less efficient, more expensive and cross-border use could need further trade agreements and expensive tariffs to ensure their supply, especially in the event of a no-deal Brexit.
· Uncertainty over carbon pricing: Currently the UK is part of the EU Emission Trading System, the largest greenhouse gas trading scheme in the world, which caps and trades emissions between countries in a bid to limit environmental impact. Cut free from our responsibility will cause uncertainty across the market as we’ll be unable to price our own thermal generation.
· A weakened pound: Any volatility surrounding currency affects the energy market and if Sterling crashes after Brexit because we have no trade agreements in place our ability to cost-effectively buy and stock crude oil from the US or energy from the EU will be impacted. UK energy bills rose by £2bn*** when the pound plummeted after the original referendum!
Everything we are seeing in terms of longer-term cost forecasting indicates aggressive price-hikes between now and 2024. So, don’t wait for a price jump to just happen to you!
What can you do to ‘Brexit-Proof’ your company’s energy tariff?
· Price comparison: Costs between suppliers can vary by up to 50%, so always do your research and comparison to get the best deal. Or find an experienced business energy supplier who will do that time-consuming legwork for you.
· Pre-emptive strike: If you’re opening or building new premises, or looking to reconnect a service, try to lock in your provider and tariff in advance rather than waiting for deals that might not materialise. But before committing to any new energy agreement, be sure to check that any third-party charges, levies or non-commodity costs are fully fixed for the term of the agreement, this will protect your business from any hidden ‘nasties’ which may be added to your billing post-Brexit.
· Longer, fixed term rates: Ideally look for at least a three-year fixed rate. Now we’re on a ‘flextension’ Brexit could happen (or not) at any time, don’t let a surprise crash out of the EU catch you out and cost you money. At Focus Group, we can secure competitive, fully fixed energy prices up to 12 months in ADVANCE of a current contract ending. Meaning your business can benefit by securing a suitable tariff right now in today’s market, rather than being impacted by additional price increases in the near future.
· And remember: The cheapest quote may cost you more in the long run. If we can’t rely on stable energy prices or supply post-Brexit, then ensure the tariff you secured in advance will still be competitive for your business after. Brexit ready businesses will be playing a long and smart game.
James Baker, Head of Energy at Focus Group, says:
"Companies have to ‘Brexit-proof’ every part of their business, and energy purchasing is no exception. Factoring the cost of your organisation’s energy bills into the mix has to be part of any UK company’s plans right now. I’m afraid waiting to see what happens is really not an option at this point. There will be many hidden costs for businesses in the next year as Brexit finally becomes a reality, don’t let your energy bill be one of them."
Focus Group help thousands of businesses reduce their company energy prices every year by shopping around for the best deals. We provide competitive and transparent tariffs and can work with companies of any size to provide multi-site solutions, re-connection services, smart meter advice and complete utility servicing.