We have been reassured that we are out of recession, we have been advised that the economy is stabilising, some of our major retailers, airlines and other large companies have reported growth in revenue, however, just as things start to seem like they are getting back to ‘normal’, the government hits us with a VAT (Value Added Tax) rise from 17.5% to 20%.

 

Of course, it shouldn’t come as a complete shock, as we were made aware of the plans when the budget was drawn up last year, but the Prime Minister David Cameron had said post-election, that a VAT rise was not part of their plans.   Of all the promises that the government has made since the elections, why is this one of the ones that it has to break, especially when not everyone in the cabinet is in agreement?

 

The increase took effect at midnight last night, so the opportunity to purchase last minute goods and stock pile at the lower rate has now passed, but how is it going to affect other outgoings such as petrol, gas, electricity and other services?

 

Well, the good news is that residential energy bills are only subject to a 5% VAT charge, which has not been reported to change, however, the traditional 17.5% VAT which is applied to business energy bills will rise to the new 20%.  So how does this affect the average bill?

 

The average SME (small to medium enterprise) bill may rise from £2,863.72 to £2,924.65 – an increase of just over £60 a year, based on an average consumption of 25,969 kwh per annum.*  This figure may seem small to some, however, some business energy users, even in the SME market, use more than double this amount, so their bills will see a more significant increase.

 

Over the last couple of months of 2010 oil prices started to rise and this directly affected gas and electricity prices in the commercial energy market.  Almost all suppliers have seen the price per kwh of both fuels rise by up to 20% in some regions, meaning that bills are already on the rise.  The new VAT figure will only cause further strain on businesses, and the cold snap isn’t over yet.

 

So, the advice from uswitchforbusiness.com is to ensure you are on the correct tariff to suit your business energy needs and where you can, switch your energy provider to ensure that you are getting the best prices in your region and for your usage.  Not everyone will be able to change suppliers immediately – business energy users are subject to energy contracts that need to be in the renewal period before new prices, tariffs or suppliers can be discussed, but in the meantime, it is a good idea to get out your energy bills and your contract, check the end date, and be ready to check prices and secure a new contract up to four months in advance of your contract end date.  Some businesses, may not be in contracts at all, and can be paying up to 50% more per kwh for energy.  This is where the VAT rise will have an even larger impact.

 

So to save money, or for advice at any time during your contract, contact uSwitch for Business and discuss how you can reduce the impact of the VAT ad price rises on your energy bills.

 

*based on average kwh for 03/04 profile customers taken from Jan 2010 to Dec 2010.  Price calculation based on an average of 9ppu and a standing charge of £25 per quarter.

A recent report by uSwitch found that January 4^th’s VAT increase to 20% could add as much as £158 onto household bills.

 

With the public facing increases in the cost of phone bills, food, fuel and other items it’s easy to forget that there are consequences for businesses too, and small businesses in particular.

 

Businesses face a choice between putting up their prices with the VAT rise and facing grumbles from customers, or keeping their prices the same and absorbing the VAT rise themselves. It’s a definite case of being stuck between a rock and a hard place.

 

There’s also the headache of the admin that comes with the rise.

 

A survey by Sage found that nearly one in five small businesses are not ready for the increase.  The poll also found that:

 

 

 

 

 

 

 

 

 

• Just 68% of small businesses are anticipating the effect of the VAT increase
• 11% hadn’t thought about the impact of the increase
• 7% were concerned about their lack of preparation

 

So what do you need to do if you’re a retailer? Well, it goes without saying that you have to use the 20% rate from the 4th January 2011. You also need to clearly show your prices inclusive of VAT. You have up to 28 days (until 1st February 2011) to do this, and until you’ve done it, you can just let your customers know that an adjustment will be made at the point of sale. For more information on getting  prepared for the VAT rise, there’s some very useful information on the BusinessLink website.

 

It’s worth remembering that while insurance is not subject to VAT, it is subject to Insurance Premium Tax (IPT), and that is increasing from 5% to 6% in January. When your renewal date comes around in 2011, you could see your premium go up, so always be sure to compare your business insurance to make sure you get the best price.

 

 

 

Related Articles

 

 

 

 

 

 

 

 

 

 

 

 

 

 

• VAT rise to add £158 to household bills (uSwitch.com)
• Confusion ahead of 2011 VAT price hike (uSwitch.com)
• Advice on Vat for small businesses (mirror.co.uk)
• Small firms warned ahead of VAT hike (telegraph.co.uk)
• 12 tips to prepare for the January 2011 VAT rise (bytestart.co.uk)

By Ellen de Vries

Did the recent snowfall take you by surprise or were you fully prepared and able to carry on business as usual? After last year’s snow and ice chaos many companies were well prepared for a repeat performance and had stocked up on sand and grit, made remote working possible and offered flexible hours. But even with this admirable foresight, for a small business if just one staff member is unable to travel it can still have a huge impact – especially if that employee has the key to the premises!

Think ahead

Disruptions to transport services and unusable, snow-bound roads have caused huge problems for the majority of businesses, both big and small, particularly those involving deliveries. Childcare has also been an issue for many, as thousands of nurseries and schools shut their doors and large numbers of adults have been forced to stay at home.

More snow is forecast so if you’re a business that relies on being open, talk to your employees now and ask if any of them could stay nearby or even on the premises for a night or two. Is there room for a sofabed in your staff room? If you’ve a kitchen on site, make sure the cupboards are well stocked - providing food and hot drinks will make staff feel cared for and more inclined to rally round.

Don’t panic

According to The Centre for Economics and Business Research (CEBR) as many as 800 to 900 small businesses are under threat as a result of the cold snap. If you’re worried about the impact of recent snowfall on your business finances, consider contacting your bank now; Barclays is offering a financial support package to affected business banking customers. And remember, everyone is affected so customers and clients will be sympathetic.

Warming to the weather

Of course, not all businesses are suffering because of the snow – sales of sledges, thermal underwear and trapper hats are up! And, thanks to the internet, many businesses are perfectly able to work efficiently even if staff are stuck at home; meetings can be conducted using Skype and as long as security is not an issue, a system such as GoogleDocs can be used so that staff can share documents.

If your premises are open, you may be worried about the cost of keeping them warm over the next few weeks. Keep heating bills down by sealing windows, checking the position of your thermostat, keeping radiators clear and making sure the heating is off in unused rooms. And perhaps invest in a few trapper hats for your staff…

Related Articles

• Small business ‘hit hard’ by snow (bbc.co.uk)
• Weather a huge blow to economy (mirror.co.uk)

Today, Business Advisor Risha Premarajah writes about the impact of Daylight Savings Time on businesses as the government moves one step closer to reviewing the potential impacts of turning the clocks back.

 

Now we have adjusted to the dark nights and cold mornings, the shift to winter patterns and increases energy consumption, the risk of accidents and the numerous inconveniences that the changing hour and the dark nights of winter bring, we can ask ourselves: Does daylight saving time actually save us anything?

 

 

 

When the clocks went back signalling that winter had finally arrived, I was looking forward to that extra hours’ sleep and to not having to wake up for work in the dark, but realised that the positives of this daylight saving act are relatively short lived.  Winter in general, costs us more.

 

As we know from our school science days, the sun gives us two types of energy - heat and light - and we have to replace these (at our own expense) when it sets, leaving us in the cold and dark. We cannot change how much daylight we receive… but, with a little clock fiddling, we can change when we receive it. As summer spoils us with such an abundance of daylight, everyone is happy. Winter is more problematic as we are faced with a season that simply doesn't provide enough hours of light to shine from the morning to the evening. So what do we do?

 

For a start, the cold weather means that we turn on and crank up the central heating without a thought for the cost – you just want to be warm right?  And then there’s the issue of light.  Darkness falls around 4:30pm on the darker days compared with as late as 9pm in summer, and so increases the use of artificial lighting, leading to inevitably higher consumption and higher bills.

 

Winter is undoubtedly a trying time for everyone. For me, waking up to sunlight on my retinas (however faint) is a plus and keeps us in tune with our natural, diurnal rhythms that maintain our body clocks. It could even be a help in warding off the comically titled but potentially devastating affliction, S.A.D. (Seasonal Affective Disorder). If we are resigned to travelling home and spending the evening in darkness, so be it.  Once home, we can always take comfort in a hot mug of tea, a warm duvet and a (responsible!) blast of central heating. We can cosy up and forget about the world outside.

 

But what does it mean for businesses who have to keep going throughout the winter period without the luxuries of domestic diversions?  Increased costs can be a real strain for business budgets and keeping the workforce comfortable to maintain productivity comes with the associated expense.  So is this daylight saving really the way forward in an economically tough climate where energy efficiency and saving resources are hot topics?

 

Daylight saving is something so routine that I’ve never stopped to think why we have it at all. Getting my head around whether we ‘lose’ or ‘gain’ an hour has always proved too much for my mind and outweighed the need for any further bamboozlement.   But what is Daylight Saving Time and why do we do it?

 

During the latter half of the year, the earth tilts slightly on its axis so that the Northern Hemisphere is angled further away from the sun, while the Southern Hemisphere becomes closer. The sun is lower in the sky and begins to set earlier, so that in winter, the evening and night hours can be as long as 19 hours in some places.

 

Daylight Savings Time or DST is the practice of putting the clocks forward during summer so that the evenings have more daylight.  The way I like to think about it is, in reality the working day gets moved up in time, with everyone waking up an hour earlier and sleeping an hour earlier. In summer, this is more in keeping with the time the sun actually rises and sets, and thereby maximises the number of sunlit hours we receive. DST was first implemented in 1916 and with the exception of a few experimental years here and there, has been the norm ever since. The clocks go forward in the first week of March and return back to Greenwich Meridian Time (GMT) in the last week of October.

 

Unlike winter, the advantages of summer DST are bountiful. There is the obvious gain of finishing work with many hours of sunshine left to enjoy, and there is evidence of fewer traffic accidents during the hours when there is natural light illuminating our roads. One other great benefit of DST is the reduction in electricity consumed as people need to turn on the lights for at least one less hour per day, and with so many people doing the same, has the cumulative effect of saving significant amounts of energy and reducing carbon emissions.

 

Getting the same effects in winter is much harder to achieve, but there are ways to cut costs and lower consumption.  It is a time when we take for granted heating and lighting and flick the switches rather than reaching for an extra jumper.

 

But, both homes and businesses alike can become more energy efficient by ensuring that you have the best deal for your energy.  In both arenas, prices always start to rise as winter begins, leaving us out of pocket by the time it’s ready to change the hour again!  Check your rates and see if you can switch your energy to get a better deal.

 

For business users, it is a time to not only check your rates, but check your contract end date to see when you are able to start negotiating your new prices.  The service offered by uSwitch for Business can help you get the most out of your business energy contracts and help you to find the best deal to suit your business needs.  They can also offer tariffs with Smart meters to help you to identify periods of heavy usage so that you can rethink your output, and advise you when you can switch.

 

With limited daylight available, use this to its maximum where possible so that you are only doing activities that need artificial lighting for a minimum period.  Rethink your heating methods – are you using costly electric heaters, rather than investing in more cost effective means?  Various companies provide energy reviews and can advise you where you can really make savings with regards to insulation, metering, output and general energy saving measures such as automatic switches, energy monitors and draft excluders.  When the hour changes, we need to be prepared and employ methods to counteract its effects, however, this is often met with additional costs and a certain amount of effort, which can be hard to find, especially when running a business in today’s climate.

 

by Risha Premarajah,

 

Business advisor, uSwitch for business

 

Related Articles

 

 

 

 

 

 

• Daylight-saving time in Japan: Bright idea (economist.com)

Smart meters have appeared more and more in the news agenda over the last few years, heralded as the latest high-tech bit of kit that’s going to revolutionise the energy market. But did you know that smart meters have actually already been around for forty years?

Half hourly electricity meters, the forerunner of smart meter, have been around in their thousands on the business energy market for many years. They’re fitted to higher consuming business premises and they automatically send electronic meter readings every 30 minutes. They help businesses improve their energy efficiency, and help to ensure the safe running of the electricity network too. They’re tried, tested and proven.

Furthermore the techie people in the old British Gas Research Station of the 1970s developed fully working gas smart meters – a revolution we are still nowhere near to seeing today.

Yet in 2010, whether we’re business or a domestic customer, we are still waiting for smart meters to truly take off.

The vast majority of us still have to put up with estimated bills, sporadic meter read visits, sore heads from climbing over obstacles under stairs to read an antiquated meter just to make sure we don’t pay too much or too little month after month.

The lessons learnt with half hourly meters, the advent of mobile telecommunications and the reduced cost of manufacturing brought about by our global commercial world should all point to an open goal to get them delivered… but we’re still waiting….why??

There are some glimpses of sunshine out there though…there are plenty of innovative businesses in the UK and across Europe building solutions, some of the newer electricity suppliers have put smart metering at the centre of their product lines and some of the big traditional suppliers are waking up to the demands of their customers.

For businesses there is an upside too – with half hourly meters you can be an early adopter of sorts and start getting the benefits of smart metering ahead of domestic customers. If you’re interested in half hourly metering for your business, get in touch with uSwitch for Business.