Energy Costs Prompting 4 in 5 UK Businesses to Raise Prices Soon

A recent study conducted by PwC has highlighted the effect that rising energy bills have had on UK businesses. The survey, conducted in November and December last year, collected the thoughts and opinions of 750 UK organisations affected by the rises. Unsurprisingly, the high energy costs experienced in recent years have caused many to consider how best to absorb them.

Unfortunately for UK consumers, this has meant that 81% of the 750 businesses polled expect that they will raise their prices in the next two years in an attempt to offset higher bills. While this is undoubtedly bad news for the public, it can also have the knock-on effect of reducing sales if consumers decide to shop around for a better deal. Without a change to the current energy landscape, we could be looking at a volatile couple of years for UK businesses, more so if prices are allowed to rise even higher.

Of the businesses polled, many are already finding that they’ve found the ability to remain competitive in their industries diminished. 64% revealed that they have noticed a decrease in their competitiveness within the UK in the last two years, while a similar 65% noticed a reduction in their ability to compete with international firms over the same period. These figures only get worse when businesses were asked to predict their competitiveness over the next two years. 72% and 71% expect to be less of a market force in the UK and overseas respectively.

Russia’s impact

Two thirds of those surveyed explained that their organisations had seen either their profits or margins reduced as a result of soaring energy costs. More had little confidence that things would improve, with 72% expecting their margins to be adversely affected in the next 24 months.

After Russia’s invasion of Ukraine, and the subsequent sanctions imposed on the oil-rich country, much of Europe has seen their energy prices jump significantly. PwC’s report found that a third of the organisations surveyed had experienced an 11% rise at least. This price hike has made day-to-day operations difficult for a number of companies, with 25% of all respondents citing that government energy support had been “essential to survival”.

Rick Smith, Managing Director of Forbes Burton, explained that “we’re yet to see the full impact that the Russian invasion has had on UK businesses. While we’ve witnessed companies that traded directly with Russia and Ukraine fold almost overnight, the economic effect that the sanctions are having on the rest of the UK is still unfolding. Combined with the cost-of-living crisis and rising inflation, we’ve entered the perfect storm for mass insolvencies”.

Indeed, looking at how many UK businesses struggled during 2023, it seems like the next two years have the potential for further strife if we don’t see any solutions for rising energy costs.

Have soaring energy prices had an adverse effect on your business?

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