Yes, the energy sector is improving, but spare a thought for small businesses

All six of the big energy providers have now cut their prices this year. Unfortunately, someone hasn’t been invited to the party.

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The Independent Online

One could be forgiven for thinking that Britain’s energy market is finally beginning to work in the way that it should. All six of the big energy providers have now cut their prices this year, passing on savings from lower wholesale prices to consumers. Data released last week, meanwhile, showed that six million households switched energy provider last year – a 15 per cent increase on 2014.

Unfortunately, someone hasn’t been invited to the party. Small businesses aren’t benefitting from lower energy prices, because the reductions unveiled by the Big Six apply only to the residential energy market. Most small businesses remain stuck on much higher – and fixed – tariffs.

And that switching data, which came from the industry regulator Ofcom, didn’t include small business customers. Ofgem isn’t saying how many of them switched last year, but you can bet And that switching data, which came from the industry regulator Ofcom, didn’t include small business customers. Ofgem isn’t saying how many of them switched last year, but you can bet ts final report won’t be published until June. Goodness knows how long its recommendations will take to implement.

In the meantime, small businesses continue to be held back by high energy costs The Federation of Small Businesses (FSB) says almost a third of its members now cite the cost of energy as a barrier to their growth and success. That’s worryingly high. Once they have acquired a small business’s custom, the energy companies don’t exactly bend over backwards to help them keep costs down – for example, only a fifth of the small businesses in the FSB’s survey say they have been offered advice on energy efficiency by their supplier.

In some ways, the energy sector appears to be getting worse. Energy companies have a right to object when customers say they want to move to a rival provider – but only in very specific circumstances such as when there are outstanding debts. Yet Make it Cheaper, a price comparison service aimed at the business market, says energy companies objected to 26 per cent of switching requests last year in the small business sector, up from 17 per cent in 2015.

Small business customers just haven’t been protected and supported in the same way as consumers  they are still required to give formal notice to existing suppliers when looking to switch to a new provider – in the consumer sector, by contrast, the very act of applying to a new provider counts as an automatic serving of notice That sort of problem could be solved almost instantly were regulators to show willing. Similarly, that there is no requirement on energy companies to publish comparable tariffs in order to help small businesses find the best deals.

Certain businesses are hit disproportionately hard by these problems. In particular, sectors such as engineering and manufacturing – where policymakers are supposedly targeting support as the bid to rebalance the UK’s economy – are especially vulnerable because they have such high energy costs. High bills are eating into these companies’ margins and undermining their commercial viability.

Small businesses have been waiting long enough for change – let’s hope they don’t get forgotten. 

A day late with the VAT? That’ll cost £28,000, then

Businesses that don’t pay their VAT bills on time could face large fines that take no account of their profitability – even if they miss the deadline very narrowly. The warning comes from the accountancy group RSM, following a landmark case in which one business was fined almost £280,000 for settling its VAT bill just one day late.

The company appealed against the penalty imposed by HM Revenue & Customs to an independent tribunal, but it upheld the surcharge because the law does not allow for leniency towards companies that only just miss payment deadlines; nor is ability to pay considered – the company in question had actually made a loss of £9m during the period. Instead, penalties are automatically calculated as a set percentage of the VAT paid late.

“Every case is determined on its merits, but the tribunal’s decision underlines how important it is for companies to be on top of all their VAT payments to the taxman,” said Jim Burberry, RSM’s VAT partner. “This decision also suggests it would be extremely hard to identify a situation in which the size of a penalty could be challenged on the basis of proportionality.”

It’s a rip off: hidden charges in currency transfers

Leading high-street banks are continuing to comprehensively rip off small businesses transferring money into foreign currency overseas, a new study shows, with charges that can be more than 10 times higher than the cheapest options in the market.

The research, published by SettlePay, identifies Royal Bank of Scotland as the worst offender – on sample transfers, it found the bank making a total charge of well over 5 per cent in some instances, against less than 0.5 per cent at the cheapest end of the market. HSBC, Lloyds and Barclays are also routinely more expensive, SettlePay said, though it also accused new entrants to the market of applying hidden charges.

“There’s a lot of noise made around the complexity of foreign exchange,” said George Thomas, SettlePay’s managing director. “This is made worse by major banks and even many new disruptors in the forex space being non-transparent and, in some cases blatantly misleading, with their charges. Every provider can buy foreign currency at the same rate at the same time – the difference comes in how much they then sell it on to their customers for.”

Small Business Person of the Week: Ruth Chamberlain, Co-Founder, Investly

“I launched Investly with my co-founder Siim Maivel two years ago: Siim is Estonian and we launched there first, initially offering peer-to-peer lending and then moving into invoice finance for business borrowers too. Estonia is a market with a fantastic tech eco-system – it’s where people like Skype and TransferWise started out – and it’s been brilliant to be able to tap into that.

“We’ve since launched invoice finance in the UK too, where the fintech and alternative finance sectors are flourishing. Invoice finance works very well for businesses that have to deal with real peaks and troughs in their revenues and have cash tied up in the meantime. So we’re talking to businesses in industries such as manufacturing and construction, but also in areas such as fashion and recruitment.

“Once you’re registered on the platform and we’ve conducted some basic checks, you can put up any outstanding invoice still to be settled for auction. Investors compete to offer you the best price for the invoice and they get their money back when your customer pays its bill.

“This isn’t a new idea: invoice finance has been around for a long time and can be an excellent way to deal with cashflow issues. In the past, the perception has sometimes been negative – that invoice finance is only for troubled businesses, or that it’s complicated and expensive. But an online platform that brings businesses together with investors can offer a really simple and flexible product. You’re not locked into any kind of long-term arrangement with us and the process is very transparent.

“In Estonia, we had first mover advantage in this area, whereas there is more competition in the UK with people like Market Invoice having done a good job already. But the market is growing slowly and we can bring invoice finance to a broader audience.”