Memorandum submitted by the Federation
of Small Businesses
INTRODUCTION
The Federation of Small Businesses is the UK's
leading non-party political lobbying group for UK small businesses
existing to promote and protect the interests of all who own and/or
manage their own businesses. With over 210,000 members, the FSB
is also the largest organisation representing small and medium
sized businesses in the UK.
The FSB welcomes the opportunity to respond
to the Committee's inquiry into reducing carbon emissions from
UK businesses. The following points are general in nature and
a copy of the research document commissioned by the FSB back in
2002 on the levy is appended for your information.
THE CLIMATE
CHANGE LEVY
The FSB is supportive of measures to protect
the environment and human health and encourage resource efficiency;
however environmental legislation to date has continued to apply
a "one-size fits all" approach which presents many barriers
for small businesses in their efforts to seek effective environmental
solutions.
The FSB has for some time argued that Environmental
taxation burdens small businesses disproportionately and cite
the Climate Change Levy (CCL) as a clear example of this.
Although the levy was intended to be revenue
neutral the FSB's most in-depth research into the issue, "The
Climate Change Levy—Another Cost for Small Business"
(2002), demonstrated that most small businesses are net losers,
some substantially so. The study highlighted that 88% of SMEs
who pay the CCL have payments greater than their savings on employers'
NICS. Few small businesses were even aware of the recycling of
the levy through the reduction of NICS.
Lack of awareness of the tax and the objectives
for applying the levy is a significant problem area and the report
went on to conclude that the levy did little to improve energy
efficiency among small businesses. Further FSB research in 2004[1]
demonstrated that the priority and the uptake of energy efficiency
measures in response to the levy have been negligible.
GENERAL POINTS
In the past, energy was low on the list of priorities
for many small businesses but with energy prices' escalating this
is changing. Rising costs are having an impact on profitability
and competitiveness with a recent business energy index citing
77% of SMEs reporting lower profits and 30%[2]
reporting reduced competitiveness.
The FSB has for some time campaigned for recognition
of the special position of small businesses in the energy market
who behave in a similar way to domestic energy users, in terms
of lack of expertise and levels of energy consumption.
ENERGY EFFICIENCY
Lack of resources and awareness remains a barrier
to small businesses exploring ways to mitigate rising energy costs.
They know they have to do something but are unclear about the
next steps.
The FSB has found that lack of clear advice
and information together with the constraints faced by SMEs has
prevented most small businesses from taking steps to improve energy
efficiency. 60% of SMEs have taken some steps to increase energy
efficiency (eg changes to heating and lighting) but notably 40%
have taken no action.[3]
For small companies, technical problems and the cost of changing
production processes are barriers to increasing efficiency but
so too is a lack of quality information and advice.
CONCLUSION
The Government must mount a comprehensive and
targeted campaign to promote energy efficiency measures that SMEs
can easily apply to their businesses. This should be developed
in tandem with practical support and clear examples of how small
businesses can maintain and improve profitability through energy
savings. Action must be taken to reduce the cost of green energy
which would provide a clear incentive to switch tariffs. Finally,
more Government investment in technical innovation and in financial
incentives on energy efficiency for small businesses would go
a long way to improving emissions reduction among small businesses.
15 October 2007
1 "Lifting the Barriers to Growth in UK Small
Businesses 2004" (The FSB's Biennial Membership Survey). Back
2
npower Business Energy Index 2006. Back
3
npower Business Energy Index 2006. Back
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