A Green Deal for businesses?
DECC has today published a new consultation on the Green Deal, a government initiative which will invest £14bn in energy efficiency from October 2012.
Although the domestic market is the main beneficiary of the green deal, there are some benefits for businesses too.
The consultation says that every British business will be able to install energy-saving measures like insulation with no upfront cost; the repayments will be made from the savings the business makes on its energy bills.
While help with eenrgy efficiency is likely to be welcomed by many businesses, there is a flipside: the cost. The money to pay for the Green Deal has to come from somewhere and the consultation also includes an analysis of what impact the Green Deal will have on on business energy prices and bills:
As the graphic shows, while policy will mean an eventual reduction in energy bills for domestic customers, it will lead to an increase for businesses.
The consultation emphasised that while it’s important that businesses play their part in the transition to a low-carbon economy, it’s vital that they remain competitive too. So before the end of the year, the government will be announcing a package of measures to help energy-intensive businesses.
I asked our director, James Constant for his take on the Green Deal consultation:
“Any help to enable businesses to reduce their energy overheads and protect the environment is to be welcomed, however this should not be at the expense of increasing the transparency of the market and fair pricing for businesses.
“For too long domestic customers have been the sole focus of market improvements and businesses have been left to suffer in hopeless silence; as a way to raise business energy up the agenda this move is welcomed, but there shouldn’t a sting in the tail of price rises to support the benefit for the few who are able to make use of the energy efficiency measures being proposed.
“It would be far better would be to increase market transparency, encourage innovative new suppliers to enter the market and make smart meters and active energy management the cornerstone of business energy efficiency. This would not only reduce unnecessary energy costs, but also boost businesses’ cashflow with accurate billing.”
We won't bankrupt Britain: George Osborne at the Tory Party Conference
“We’re ending the one-way bet against small business." Image by the Prime Minister's Office via Flickr
You may not be blue, but if you own or work for a small business George Osborne has made a statement that should make you sleep just a little bit easier at night.
‘A politician that is going to help me sleep more easy at night?! Stop telling porkies!’ I hear you cry.
Well, yes. In his most recent speech at the Conservative Party Conference on Monday in Manchester, the big GO played it straight down the line in relation to climate change and small businesses.
First off, he mentioned that he wanted to create the world’s first ever Green Investment Bank. Better get his skates on regarding that because it won’t be anywhere near as interesting if he only creates the world’s second Green Investment Bank.
The second item in relation to climate change is the good bit. Now I don’t want to dilute the message from how it came across, so in his own words...
“We’re ending the one-way bet against small business.
“Now we know that a decade of environmental laws and regulations are piling costs on the energy bills of households and companies.
“Yes, climate change is a man made disaster.
“Yes, we need international agreement to stop it.
“Yes, we must have investment in greener energy. And that’s why I gave the go ahead to the world’s first Green Investment Bank.
“But Britain makes up less than 2% of the world’s carbon emissions to China and America’s 40%.
“We’re not going to save the planet by putting our country out of business.
“So let’s at the very least resolve that we’re going to cut our carbon emissions no slower but also no faster than our fellow countries in Europe.
“That’s what I’ve insisted on in the recent carbon budget.”
Now some might say that this is a clear statement that he is not really interested in Europe or playing his part to really draw a halt to the problem of climate change. But I see this as a statement of intent that says we are not going to be rail-roaded into changes which could potentially further damage our very fragile economy.
Reality check time - we need to be green and get greener, but we also need to survive in an economical sense through these incredibily tough times.
In case you are interested here is a link to the full speech.
Heaven knows I’m miserable now
The Misery Index Image by dhammza /off via flickr
What do you get if you cross inflation and unemployment?
No, I didn’t find it particularly funny either, but there is a serious point behind this.... the Misery Index really does exist and it does use the factors above adding the rate of inflation to the percentage of the population without a job.
In other words: inflation + unemployment = misery.
And the latest version of the index says we’ve just got more miserable than at any time since 1994.
The latest data from the Office for National Statistics tells us unemployment stands at 7.9%, a near fifteen year high and CPI Inflation has hit 4.4% (again).
So we’re miserable, fact. But is there hope around the corner?
Well no, not on the face of it: two of the biggest staples which drive the inflation figure have been the subject of significant focus, debate and protest. We know all about the volatility in business energy prices but we now see rail fares are set to grow at twice the rate of inflation.
As a nation our media understandably focuses on the consumer angle but with pay rises at around 2%, prices rising and employment increasingly uncertain there is no way businesses can expect to ride this latest sentiment through with no impact.
On a more direct basis, the cost increases of the commodities with which we run our businesses and the cost implications for travelling the UK to drum up custom was bad enough when petrol has been nudging 145p a litre but now the only viable alternative in rail travel is going to similarly hurt productivity.
All very gloomy indeed, but we didn’t survive this far by giving in and neither did you.
It’s pretty obvious that uSwitch for Business will help you save money on business energy, business comms and business insurance but given the latest news and how we depend on the rail network to drive our business forward we’re focusing on finding a travel solution for our customers..
it’s in the planning stages, and is hyper-political (not us but the train companies, ATOC, the regulator... I could go on) and as a result it is by no means certain to be allowed but we’re going to try...
Keep in touch with us to find out more and in the meantime sort those costs we have a solution for today and help keep the business fight back going
Heaven knows I’m a little bit more positive now.
Railways In Crisis?
Firstly some disclosure... I use the train to commute to work, I am lucky that I use a service on which I get a seat, I get a disproportionate amount of work done and it effectively extends my day and productivity so my investment in my season ticket is worth it. I also quite like trains, the whole experience, but I recognise not everyone does and not everyone has such an enabling journey to and from work.
That said I am concerned for myself and for the potential impact on the country’s productivity and mobility with the latest round of fare rises.
We’re living in crazy times when you almost become desensitised to price rises and uncertainty but there are times when the potential implication just cannot be waved away with a resigned shrug. This feels one of those times to me.
Now we’ve said before we’re not about bashing businesses making a healthy profit from the services they provide but they need to be good at what they do, provide value for money and a quality service.
As you will be aware our main focus to date has been business energy, and that in itself is an industry of complex and opaque structures that doesn’t help promote transparency and the impression of value. It is interesting then to consider the similarities of the structure of the UK rail network with the UK energy industry, especially the train operating companies and their financial, political and management relationships with government. It really is an industry that takes a while to get a grip with. But that we have endeavoured to do.
So a brief attempted dissection of the rail industry set-up
- The government via the Department of Transport tender out franchises to ‘suitable’ companies, these are fairly long term deals (the latest West Coast Mainline franchise is for at least 14 years).
- The government retains the right to set a number of fare types centrally
- The government receives payments from the train operating companies to cover the fee for operating the franchise where revenue and profit targets are achieved
- The Department for Transport is however obliged to cover a proportion of train operators’ losses if their revenues are below target, presumably to encourage franchisees to take the risk on an uncertain market
- This obligation has at times been up to 50% of the total cost of the network
- This ‘subsidy’ is in itself subsidised by the taxpayer, whether business or individual.
- The government is keen to shift the cost burden from the taxpayer to passengers
- Government support has dropped significantly over the past five years, falling from £6.31bn in 2006-07 to £3.96bn in 2010-11
- Much of this spend is attributed to ‘network access charges’, a very similar argument to that which we see from UK energy companies about price rises being in part down to the requirement to overhaul the energy network.
The focal point of this blog is that the government is keen to decrease the taxpayer burden further and as a result has announced that rail fares could rise by an average of 8 per cent in January. When I say ‘could’ that isn’t in the sense of it may or may not, it is in the sense that as long as a train operating company raises its total fares on average by 8 per cent, individual fares could rise by much more.
So how are the train operators doing?
Well my service provider Virgin Trains (operating the West Coast Mainline franchise) have just made the record payment to the government for a long distance franchise, paying them £110m for 2010 whilst reporting a profit of £39.9m. Having said that, Virgin has received subsidies totalling £1.4bn over the 14-year life of the franchise so far. So a bit of a mixed bag, to be fair though I can vouch that the general punctuality, cleanliness, reliability and wi-fi capability of the trains is significantly better than their rivals.
South West trains, which run between Waterloo station in London and the stockbroker belt, and which is very much a local commuter service, earned the government about £150m in 2010... and I’m aware of the horror stories of chronic over crowding.
First Great Western, which operates between London Paddington and the West Country, Wales and Oxford, paid the government £106m in 2010.
On balance therefore all very healthy one would assume
But back in October, Philip Hammond, the transport secretary, announced that all government-set fares – which include season tickets and off-peak return fares – would increase by 3 percentage points above RPI for the three years from 2012. This compared to a rate of 1 percentage point above RPI from 2004. A significant increase and indeed in a recent discussion we’ve had with some senior rail insiders there was surprise expressed at the aggressive pricing positioning this placed train operating companies in.
Subsequently the Office for National Statistics figures have shown retail price inflation (RPI) for July – the figure used as the basis for calculating January’s fare rises – is 5 per cent. Don’t you just love that the government swing between RPI and CPI (Consumer Price Inflation) just to make the outcome worse for us. A digression but surely one accurate measure is better than arbitrarily using alternate measures?
So 5% + 3% and we are faced with that average increase of 8%.
The train operators have said fare increases were vital to ensure continued investment in the UK rail system, hmmm I’ve heard that somewhere before, substitute energy for rail and you’ve got the picture.
To justify it, Mr Hammond said: “We are now embarked on one of the biggest programmes of rail investment for 100 years, delivering more than 2,700 new rail carriages, a £900m programme to electrify more lines and the vital Crossrail and Thameslink projects in London.
“Due to the scale of the deficit, these investments would simply have not been possible without the difficult decision we have made to increase rail fares. I know this decision has not been popular, but I hope passengers will appreciate the improvements it allows us to make.”
Thanks Philip, that’s great if you live in London.
David Mapp, commercial director at the Association of Train Operating Companies, said the government had decided on the above-inflation increases to help pay for more trains, better stations and faster services.
“Increasing the money raised from fares will mean that taxpayers contribute less to the running of the railways, while ensuring that vital investment can continue, all additional money raised through the change to RPI plus three will go straight back to the government.”
Isn’t it funny that rail users are not tax payers and tax payers don’t receive a generic benefit from railways.
From an alternative perspective, David Sidebottom, director at Passenger Focus, has called for a review of fares policy as he cautioned “The way that train companies are allowed to set fares on individual routes is deeply unfair, some passengers, who may have seen no investment or improvements, can get hit year after year.”
And Shadow transport secretary Maria Eagle said “The cost of getting to work is, for many people, the biggest single item in the monthly budget – bigger than mortgage payments and bigger than rent”
Furthermore Alexandra Woodsworth, public transport campaigner of the Campaign for Better Transport, has said “We need affordable rail travel – not only to give passengers a fair deal, but to protect the economic health of our major cities”
And that really is the crux of this blog, businesses rely on the rail network both to get staff to work, and provide the ability to travel the country ‘on business’ cheaply, quickly, effectively and most importantly efficiently. Take a straw pole of commuters and I’m pretty sure none of the respondents would put a tick against each one.
For me it is cheaply (NO!!!), quickly (yes), effectively (yes), efficiently (yes)
So 3 out of 4 isn’t bad and that’s what got me thinking... we’ve made business energy cheaper for our customers, we’ve made business comms cheaper for our customers.... now how can we make business travel cheaper for our customers?
To progress this we’ve immersed ourselves in the UK rail network over recent months and we believe we have come up with a solution that will deliver rail travel for businesses that will be:
- Effective, and
- More efficient
We can’t solve overcrowding, the short run commuter routes into London aren’t our focus, but long distance travel into and out of our larger cities, including London are. Just the sort of routes that we need to use to keep in touch with customers and opportunities, potential and existing.
We’re not ready to launch yet, we have a few hurdles to overcome within a highly opaque industry dominated by a few large players that is heavily politically influenced in its activities …. we have some experience of industries like that already!!!
But when we are ready to go we’re aiming to bring the same ability for businesses of all shapes and sizes to reduce their energy costs to your travel costs.
Watch this space!
Small businesses – the engine room of the UK economy
by James Constant
Salvation comes in many disguises
Happily for the UK economy that salvation today is coming from SMEs
The latest Manpower Employment Outlook Survey reveals that whilst the hiring plans for the country’s largest businesses has fallen for the third successive month SMEs are predicting significant job creation.
Mark Cahill, UK Managing Director of Manpower highlighted SMEs importance to the UK economy by saying “we’re now seeing them build their workforce again and becoming an increasingly important source of job creation in the UK”
Whilst the confidence and sheer will of SMEs to succeed and to lead the country out of the doldrums is admirable there are still challenging times ahead. Sadly an SMEs ability to raise their prices whether it be as a service provider, manufacture or retailer is significantly less that the ability for the country’s largest businesses to raise an SMEs cost base, none more so than when it comes to business energy.
With continual rumours of business gas and electricity prices rising across the market there sometimes feels that there is no hiding place. Not only that but staples such as business telecommunications as part of a supply chain could all see costs grow in the coming months. Whilst there is no hiding place from the harsh realities of running an SME in these trying times there is a haven for cost saving at uSwitch for Business.
SMEs are fighting back from the brink of an economic apocalypse but now is not the time to rest on our laurels, we owe it to ourselves to make sure that we are able to invest in growing our businesses and not growing the bottom line of business energy suppliers.
Our engine room may be driving us forward but there’s still room for fine tuning of SMEs to really get the country motoring again and a cost conscious approach freeing us to make investments in future growth is just about the best way we can ensure it.
Here’s to a happy outlook
- The draft Energy Bill: a five-minute summary
- 60% increase in business energy costs as average turnover falls by 6%
- Business week in brief: 11th May 2012
- Ed Miliband and the Queen talk energy
- Interview with Steve Fitzsimons of new business energy supplier, Hudson Energy
- Business week in brief: 4th May 2012
- The see saw of corporate profit
- Business week in brief: 27th April 2012
- EDF Energy’s Business Customer Commitments: four key pledges
- Businesses buck the trend when it comes to smaller energy suppliers