|NEW RESEARCH SHOWS UK BUSINESSES BEING RIPPED OFF ON ENERGY
August 12 2015.
- 18% of smaller businesses have been ‘locked-in’ to a fixed-term contract without their permission (and a further 16% are unsure if they have)
- More than 30% of small businesses have been shunted onto a ‘deemed contract’, leaving them paying up to 80% more
- Over half of small business do not understand their energy contract
- 1.3 million businesses do not know how to terminate their energy contract
Businesses are being rolled over and locked into energy contracts without their permission, a study by SwitchMyBusiness.com has found, alongside a catalogue of other issues.
According to the SwitchMyBusiness.com research, 18.4% of businesses have been automatically rolled over onto a new contract without their permission and a further 16% don’t know whether they have been a victim of auto-renewal.
The study comes in the wake of the Competition and Markets Authority (CMA) report which found that UK SMEs are unnecessarily losing GBP500 million a year on energy.
While Ofgem and some energy suppliers have made steps towards making the business energy market fairer, the practice of ‘auto-renewal’ – where businesses are ‘locked in’ to another fixed-term contract without their express permission – continues.
The SwitchMyBusiness.com research also showed that more than 30% of small businesses have been shunted onto a ‘deemed contract’ (30.4%) with the same supplier at the end of a fixed contract, leaving them paying up to 80% more.
A further 16.8% are unsure whether they have been put onto a deemed contract, and the majority of UK SMEs stated they have had problems understanding their energy contract at all (50.4%), a sign the business energy market urgently needs more clarity.
Knowing how to switch supplier is vital if businesses are to avoid getting ripped off or paying more than they need to. But more than a quarter of smaller to medium-sized businesses (25.6%) do not fully understand how to terminate their current business energy contract, meaning as many as 1.3 million** businesses are losing out on better energy deals.
“These findings prove that the UK’s SMEs are still getting a raw deal,” says Ivan McKeever, CEO of SwitchMyBusiness.com, which carried out the study. “Smaller to medium-sized businesses are in a uniquely challenging position: the business energy market lacks the transparency that consumers now have and smaller businesses do not have the resources to liaise with lots of suppliers and negotiate a good deal.
The research shows that much more needs to be done to help small businesses with their energy bills. SwitchMyBusiness.com appeals for the government to take urgent action:
- Auto-renewal must be outlawed – the Micro Businesses and Energy Contract Roll-Over Bill 2012–13 should be reintroduced to Parliament or a similar Bill drafted.
- There should be a cap on how much more businesses who are on deemed contracts are charged: Ofgem says that around 10% of smaller businesses are on such ‘deemed contracts’ at any one time, which costs an average of 80% more.
- All suppliers must be put on a level playing field, with suppliers required to make information easily accessible and switches more straightforward to ease the burden on busy businesses – the Competition and Markets Authority (CMA) has recently made similar observations.