When setting up a business, there are a million and one things to think about — energy costs being one of them.
But for energy-intensive industries like manufacturing or food production, those energy costs can be critical to your bottom line.
We looked at our data and asked the question: where is the most expensive region for business electricity costs in the UK? Moreover, how has that influenced the growth — or decline — of businesses around the country?
Companies in Wales pay the highest rates for business electricity
Our interactive map of UK business shows that Wales is the most expensive region for business energy costs, averaging 16.7p per kWh. That’s 11% more than London, the UK’s wealthiest region, which pays just 15.0p per kWh.
Second and third were the South West (16.5p per kWh) and Scotland (16.4p).
Based on these figures alone, a large manufacturing company based in Wales using 20,000 mWh per annum could spend £3,300 more per year on energy that a counterpart based near London.
How is it affecting business in the region?
Despite high energy costs in Wales, business growth hasn’t been affected.
Our research into government data showed that in recent years, Wales was the top UK region for starting new businesses. Between 2016 and 2017, Wales saw a 17% rise in the number of new start-ups. Northern Ireland was close behind with a 16% growth in new businesses, while the North West was third with 14%.
All other UK regions saw negative business growth over the same period.
Why does energy cost more in Wales?
It might seem unfair that Wales has to pay more for energy than wealthy businesses in London, the higher costs are down to logistics.
The UK imports a large amount of its energy from sources in Europe, with the majority of our gas and oil coming from Norway, and coal from Russia.
As so much of our energy is imported, it has to travel further to reach our homes and businesses. When energy is transported, some of it is lost. The further that energy has to travel, the more of it is wasted in the process. This energy loss means you have to use more energy overall to get the same output if you’re far away from the source.
When the UK imports energy, it imports it from the east coast, which faces Europe. Most of this energy comes into London before it is distributed to the rest of the UK. This means London is the first to get energy so less of it is needed to generate each kWh of output.
On the other hand, regions like Wales and Scotland are further away from the source of energy. While some power stations in the regions can make up for the energy loss, these regions still have to pay more overall.
Can costs be lowered?
The market cost of energy is dependent on a lot of external factors, so regional prices naturally fluctuate beyond the control of any one person.
However, Love Energy Savings is committed to saving businesses money on their energy costs by switching them to a better deal.
Phil Foster, CEO of Love Energy Savings, said: “Start-up and operating costs are key considerations for both new and existing businesses – and energy bills form a huge part of that equation.
“While this research shows that business birth rates have gone up in regions where energy costs are higher than elsewhere, it still seems harsh on those areas that they have to pay more for their power.
“We’re committed to building partnerships with energy suppliers that offer incredible deals so that our customers’ ventures thrive and flourish.”
Want to reduce your own business energy costs? Check out our free energy comparison tool today — all you’ll need is a postcode to get started!