For CFOs looking to reduce operational costs, energy might be the most overlooked expense.
While some industries like iron and steel manufacturing face energy costs that reach up to 32% of their total expenses, even less energy-intensive sectors, such as retail, experience a cumulative drain on profitability that can be a silent killer.
Energy costs are not a small line item anymore. Across UK sectors, energy expenses account for more than 10% of total expenditure in 16 industries, only 9 of which are classified as energy-intensive. The impact is particularly acute in sectors like chemicals, steel, and cement, where energy costs are a critical factor in keeping up with production.
Since 2021, businesses have seen their energy bills rise by more than 400%, fuelled by geopolitical tensions, depleted gas reserves, and shifting global demand.
For many companies, this rapid surge was an existential threat. In fact, the spike in energy prices was a major contributor to over 22,000 business insolvencies in 2022, and 2024 may see even more .
Small to Medium Businesses
But what if your industry isn’t inherently energy intensive?
Even for small to medium-sized businesses (SMBs), rising energy bills still pose a significant threat.
A microbusiness typically consumes around 10,000 kWh of gas and 15,000 kWh of electricity annually, while larger businesses require exponentially more, with small businesses averaging up to 25,000 kWh for both gas and electricity. For medium-sized businesses, energy consumption can surge to 45,000 kWh of gas and 50,000 kWh of electricity annually.
This energy usage, while seemingly manageable in more stable markets, becomes a financial burden during periods of energy price volatility. For businesses operating with tight margins, the increase in utility bills can erode profits, making it harder to invest in growth or maintain operations.
Additionally, many SMBs, especially microbusinesses, may lack the in-house expertise to properly monitor energy consumption patterns, leading to inefficiencies that go unnoticed for months or even years. Without proactive management, unnecessary energy waste becomes a silent but costly drain on resources, impacting everything from cash flow to long-term business viability.
The challenge is compounded by the fact that two-thirds of SMBs are unaware of how much energy they actually use, according to industry reports. This knowledge gap leaves many businesses ill-equipped to negotiate better energy contracts or implement energy-saving measures. As energy prices continue to rise, businesses that do not prioritise energy efficiency are more vulnerable to financial shocks, making it crucial for SMBs to take control of their energy consumption.
What Can CFOs do?
CFOs, this is where you come in.
To offset these rising costs, effective energy management is essential. Solutions like an energy management system offer businesses the ability to monitor and control energy usage with precision. Customers report average savings of 5%-15%, offering a tangible opportunity to power down inefficiencies and protect your bottom line. This also has the added benefit of improving sustainability scores, which have been proven to improve brand reputation and attract green funding.
With energy prices likely to remain unpredictable, the question remains: How much longer can you afford to let energy costs slip by unnoticed?
Now is the time to act — before rising energy costs make bigger decisions for you.
At ClearVUE.Business, we manage these energy costs, monitoring your energy use to identify low-lying, affordable and effective ways to reduce your bills.
Visit us at Stand B20.