Further action required to support small businesses in achieving net zero

The turbines stopped for good at Ratcliffe-on-Soar, the UK’s last coal-fired power station, on 30 September, marking a significant step in the UK Government’s world-leading policy to phase out coal power, and a major milestone in the UK’s ambition to achieve net zero by 2050.

Despite this encouraging development, more needs to be done to make net zero a reality, and to help small firms become more energy-efficient – while insulating them from future price shocks, to boot.

Accounting for 99% of the business population, the contribution small businesses could make to decarbonising our economy cannot and must not be overlooked. In fact, taking small steps across our community will have an outsized impact.

Energy efficiency and cost savings go hand in hand – the need for urgent action to help small firms become more energy-efficient and reduce their energy usage was highlighted during the energy price crisis in 2022, when a third of small businesses saw their prices doubled, and 11% had their bills tripled or more.

These swingeing price increases sadly led to the closure of many small firms, and left others with long-term cost rises which they could ill afford.

The ongoing damage caused by the energy crisis can be glimpsed in the latest business population statistics from the Department for Business and Trade, which show that the number of small businesses in the UK contracted by around 56,000 between the start of 2023 and the start of 2024, with a far higher average baseline for energy bills playing its part, tipping businesses out from viability.

FSB’s Small Business Index has found that utility bills have been the first or second-most cited cause of overall annual cost increases for over two years, mentioned as a major driver of costs by nearly half of small firms (48%) in the Q2 2024 survey.

Improving energy efficiency on small businesses’ premises would directly cut energy usage as well as costs, preventing or at least minimising the impact of another similar price crisis in future.

Energy efficiency improvements are not cheap, especially to small business owners and the self-employed who rely on their savings to get through tough times.

According to FSB’s Accelerating Progress report on net zero, more than half of small firms hold back from addressing their energy usage due to a lack of savings and uncertainty around the length of the payback period.

Government support is a vital part of the picture in empowering small businesses to improve their energy efficiency.

Plenty of green policies are focused on big polluters and domestic decarbonisation, but only a few are small business-focused. For example, the Business Energy Advice Service, which was built on FSB’s Help to Green proposal, was launched last year as a pilot to offer small firms in the West Midlands free energy audits and allowed some to access up to £100,000 of matched funding towards the cost of recommended measures.

A logical next step would be making the…