Q4 business energy insights
Energy consumption by UK businesses declined by 8% in the 12 months to the end of October 2020 compared to the same period in 2019 (1).
Both SMEs and large industrial and commercial (I&C) customers consumed less electricity and gas from their energy suppliers by broadly the same proportions, although gas demand by SMEs declined the most year-on-year.
This overall decline in energy consumption by businesses reflects the impact of the lockdown measures in response to the Coronavirus pandemic.
In addition to being forced to reduce their energy consumption, many businesses have embarked on major restructuring processes and announced the closing down of sites (examples include major high street names such as retailers John Lewis, Boots, WH Smith, restaurant chains and banks), whilst others have gone into administration (some high profile names include Debenhams, Arcadia Group and Peacocks).
Business leaders, particularly those running mid-market companies appear to be very concerned about the impact of further lockdown restrictions – even more than the impact of Brexit - over the next six months. In fact, mid-market leaders appear to be bullish on Brexit with nearly 40% predicting Brexit to have a positive impact on their business (2).
Demand for energy by businesses is generally linked to economic activity and as the UK economy enters into another national lockdown in January, this is likely to continue to put extra downward pressure on energy consumption for the remainder of the first quarter.
(1) Cornwall Insight business energy market report October 2020
(2) Grant Thornton survey of 642 senior decision makers in UK mid-market businesses December 2020. Turnover between £50m-£500m
(3) Non-energy costs including Policy and BSUoS cost index growth for a sample customer with a non-half hourly meter: Charges & Levies include RO, CCL, CfDs, CM. Transmission/Distribution components include TNUoS, BSUoS, DUoS
(4) UK power prices for Winter 20/Summer 21: ICE UK Power Settlement Prices
(5) National Grid ESO Monthly Insights, Elexon and Sheffield Solar