The UK business landscape is facing a formidable challenge as rising energy costs place increasing pressure on companies. A recent survey conducted by PwC has shed light on the significant impact of volatile energy costs, prompting 81% of businesses to consider raising their prices for goods and services in the coming years. In this article, we will explore the implications of this energy-related predicament and how businesses are responding to maintain competitiveness in a changing environment.
The Present Dilemma
Over the past two years, a staggering 77% of businesses have experienced an uptick in the prices of their products and services due to high energy costs. This upward trend has not only affected pricing but has also taken a toll on profit margins, with over a quarter of companies reporting negative impacts on profits and margins during this period.
Domestically and internationally, the competitive landscape has been disrupted, with 64% and 65% of businesses respectively citing high energy costs as detrimental to their ability to compete.
The Future Outlook
Looking ahead, the challenges posed by high energy costs are far from over. A substantial 81% of survey respondents anticipate that energy costs will continue to exert upward pressure on prices over the next two years. This projection has implications beyond pricing, as 72% expect these costs to negatively impact profits, while 71% foresee challenges in competing effectively in international markets.
Furthermore, energy costs have surged by 11% or more for a third of organizations in the last two years, underscoring the severity of the issue. To cope with these challenges, all respondents have received some form of government energy support, with a quarter of them considering it “essential to survival.”
Diverse Energy Strategies
Businesses are adopting a variety of strategies to navigate the energy landscape. While reducing energy consumption, lowering carbon emissions, and cutting energy costs all rank highly as objectives, companies are also actively pursuing cost mitigation efforts.
These efforts include reviewing energy procurement strategies, improving energy efficiency, and adopting corporate power purchase agreements. Notably, over half of the respondents have experienced at least moderate success in minimizing energy costs, indicating the effectiveness of these strategies.
The Call for Long-Term Transformation
Vicky Parker, Sector Leader for Power and Utilities at PwC UK, emphasizes the need for a long-term vision to address the challenges posed by volatile energy prices. She highlights the importance of achieving predictable and controlled energy costs while eliminating carbon emissions. While government support has provided a temporary buffer, it cannot serve as a permanent solution to volatile energy costs.
Parker encourages organizations to recalibrate how they use energy, emphasizing the importance of greater competitiveness, resilience, and control in an evolving global economy where energy efficiency and carbon emissions play pivotal roles.
Conclusion
The rising energy prices in the UK have set in motion a series of responses from businesses, ranging from adjusting pricing strategies to adopting innovative energy solutions. The challenges posed by volatile energy costs are real, but they also present an opportunity for businesses to rethink their energy strategies and embrace long-term transformations.
As the nation’s energy transition unfolds, businesses that take proactive measures to address these challenges are likely to emerge stronger, more competitive, and better equipped to thrive in an environment where energy efficiency and sustainability are integral to success. In this ever-changing landscape, adaptation and innovation will be the keys to a brighter, more energy-efficient future for UK businesses.
