Small businesses are still paying too much for energy

I Tis still a somewhat surreal experience to visit my local bakery and not be served through a hatch. The shop opened during lockdown, and has been hugely successful, with lines down the street for a coffee or, on a lucky day, one of their excellent cardamom buns.

The past year has made many of us place more value on the contributions our local businesses make to our communities, which in the past we have often taken for granted.

Their absence has been sorely missed during the past year or so, and it was unnerving to walk by shuttered or empty storefronts in once vibrant areas. Of course for those who actually own such outlets, or work in them, the experience has been more serious than that.

So as shops reopen and life starts to feel more like normal again, it’s worth reflecting on the challenges ahead for small and medium enterprises (SMES) as we start to consider recovery from the pandemic. In particular, I want to focus here on what all of this means for the transition to net zero.

Because this is an area that we all need to be thinking about more immediately than perhaps we have done hitherto.

Both the UK and Scottish governments have binding commitments on reaching net zero (by 2045 in Scotland, by 2050 in the UK). And this will require all parts of our society and economy to take steps to cut emissions urgently.

This of course was the case before the pandemic hit us. But the virus has perhaps both sharpened people’s awareness of the frailties of the SME sector, and also provided that oftendiscussed inflexion point in how we can do some things differently from how we have in the past.

So, with a coffee and cardamom bun in hand, let’s look at some figures. SMES make up 99 per cent of private sector firms in Scotland and employ the majority of the workforce.

The impact of Covid-19 has left as many as 60% of SMES at risk of running out of their cash reserves. Polling done on behalf of Citizens Advice Scotland late last year found that one in three SMES across the UK are concerned about their energy prices rising, a fear that is doubled in the hospitality and leisure sectors, two out of three respondents from which are concerned about price hikes.

As the country recovers from the pandemic, it’s vital that Scotland’s net zero targets are placed front and centre in our recovery.

The industrial and commercial sectors account for three-fifths of Scotland’s annual electricity and heat consumption, and Uk-wide, SMES contribute up to 53% of the UK “environmental impact”, including greenhouse gas emissions.

Reducing the carbon footprint of SMES will clearly have a vital role to play in decarbonisation, but it’s not a sector that is included in citizens assemblies or discussions about reducing emissions. Almost half of the SMES in our survey had already taken some kind of action about decarbonisation, which is encouraging.

However, the half that hadn’t taken action did so not because they thought it was irrelevant to them, but because they could not afford it or they lacked knowledge on the subject. It’s clear that local businesses need better advice, greater financial support, and more access to information.

New and smaller businesses are less likely than their larger and more established counterparts to have done something to decarbonise.

It seems that newer businesses with less turnover have a harder time investing in decarbonisation and know less about how it relates to their business, which makes sense.

However, with businesses struggling to turn a profit after last year, and new businesses trying to get off the ground in a precarious economic situation, we must ensure that adequate support is available, so they don’t get left behind. We also need a clear roadmap for all of our small businesses, so they know how they are expected to reach net zero.

When will the bakery on my road be expected to adopt low carbon heat? Will that include a heat pump, or will they need to connect to district heating? If they decide to begin delivering treats across a wider area, will that require an electric van, or a fleet of the same? And will there be enough charging points to sustain that?

Currently, SMES lack the kind of clarity needed to make meaningful investments in equipment or premises, and making the wrong decision could be costly down the line.

Scottish SMES in our survey were more likely than SMES in other parts of the UK to need support to get started on decarbonisation, even though they will be expected to meet net zero targets faster than their counterparts in England, Wales, and Northern Ireland.

Local businesses are a vital part of our communities, and should be included in conversations about how we would like to see our villages, towns, cities, and country transition to net zero. A just transition must include the businesses we rely on every day.

So this is a plea to policymakers and influencers at all levels. In the reach for net zero, we must take people with us. And that includes SMES – both as citizens who will need to work towards the targets, and as vital tools in reaching them.

And we need to get this right. Because it’s not just polite academic theory. This is about people’s jobs and wages, which means it’s about keeping families out of the nightmare of debt, allowing them to pay their rent or mortgages and put food on the table.

And if that’s not enough, it’s also about the very survival of our planet. (No pressure then!)