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Increased Energy Costs – Thinking Ahead to Weather the Storm

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In this audio interview Rhian Elston, Investment Director at the Development Bank of Wales talks to Business News Wales about the impact rising energy costs is having on businesses across Wales and what businesses can do to overcome these challenges.

Rhian has more than two decades’ worth of investment experience at the Development Bank of Wales, originally joining the company as an investment executive in 2003 before progressing to senior and managerial positions.

As a member of the senior management team at the Development Bank and it investment committee, Rhian is now driving its investment in carbon net-zero work. She is also a member of the Business Wales advisory board.

She has a varied background in both debt and equity investment, leading on investment activity in Wales.

Interview Highlights

  • What we're being told by our portfolio companies is that energy cost management is a challenge going forward.
  • Business do not benefit from the price cap in the same way that we do as consumers.
  • It's not uncommon for businesses when negotiating a new energy contract for the price to be 2 to 3 times more than what they've had previously.
  • It's probably worth saying that it isn't impacting all businesses equally. There are some companies where energy costs might not be a big part of their operating costs, or perhaps they've been able to pass on some of the costs to their customers.
  • Rising energy costs are not the only challenge that's facing businesses at the moment. They're also grappling with issues with supply chain, the aftermath of COVID and Brexit and also some recruitment challenges with the tight labour market that currently exists.
  • Businesses are now talking about energy strategies, much in the same way that they would they financial strategy. And it's absolutely a discussion that is being had in the boardroom and across management teams.
  • Companies are getting better at taking into consideration their future needs, for example, they might go down the route of installing charging points for EV cars in the future.
  • In terms of industries that this is affecting, high end manufacturing firms and those that have got big machinery and big moving in parts within their business.
  • We don’t know how this will all play out in the future. It doesn't feel like it's going to go away, certainly not for the foreseeable future,
  • One of the biggest problems at the moment, is it just brings uncertainty, and that is that is a big enemy of businesses when they're looking to invest for the future.
  • In terms of mitigating the impact, businesses can carry out an energy walk about and try to assess where the energy is being used in the business and making sure that you do this at different times of the day, different times of the week.
  • Its important that all staff know that this is an area that your thinking about, particularly as heating is obviously a big percentage of energy usage in the company.
  • Also looking at lighting and looking at equipment use and getting better informed with data that’s available.
  • Looking at the bills, looking at the smart meters, if you have them in place, there are some long, low hanging fruit that many businesses will have already looked at. Whether that's as simple as the LED lighting and making sure that heaters are properly maintained.
  • Does your equipment have energy saving features but also make somebody responsible? And that doesn't necessarily have to be the owner of the business somebody senior that can take responsibility for this help drive things forward.
  • Its essential to keep a careful eye on cash flow management. I would encourage companies to forecast forward and take into consideration increasing costs in energy.
  • Often businesses don't own their premises, so that is a barrier. What I would encourage you to do is speak to the landlord. There is legislation coming down the line which will help and the UK Government is looking at this.
  • We also understand that people running a business are extremely busy, so there's often not the time or the resource to spend on this and possibly not the funding available.
  • There is advice out there, there is support available for companies and there are different forms of funding come in coming forward. Business Wales have resource efficiency advisers available that can come out to businesses and certainly take you on the first step. There are also companies out there, such as the Carbon Trust, that can also help businesses on their journey.
  • Businesses understand if they decrease their energy costs, then of course, that's a positive. The savings that they make are there to reinvest in other parts of their business.
  • It's also an important step on the transition to net zero, and that's something that all companies are getting on board with now and looking to see how they can do it and really enhance their ESG standards.

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The Development Bank of Wales exists to help businesses in Wales start up, strengthen and grow, by getting them the capital they need across a range of routes.

As a unique resource in Wales, we offer flexible finance to all businesses at all stages, with funds available from £1,000 to £10million.

Our teams of friendly and dedicated staff all across Wales are on hand to provide guidance on the right investment and support for your business, and can provide the local insight which we know business owners value.

We’re one of the top five institutional venture capital investors in the UK by volume, with more than £100m invested in tech businesses.

We also work alongside partner organisations like Business Wales, and offers co-investment alongside banks, crowd funders, grants, private and corporate investors and other lenders.

And we’re committed to helping Welsh businesses improve their sustainability and achieving net-zero goals, helping them to transition to Wales’ green business future.

For more information, visit the Development Bank website at www.developmentbank.wales to find out more.

 

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