Energy prices have been on a steep incline since the pandemic in 2020 and prices peaked during the energy crisis caused by geopolitical tensions in 2022. Since then, prices have significantly come down, however they continue to be volatile and chances of seeing the prices we saw pre energy crisis or pandemic are very slim.
Rising energy costs remain a key concern for many businesses with research from Cornwall Insight showing 81% of UK businesses expect to raise prices from April due to higher energy bills. According to the latest Ofgem non-domestic report, over a quarter of businesses in the UK have revealed to be struggling with their energy bills in 2024. These businesses mainly comprised micro, small and medium sized businesses.
Does the energy price cap rise affect businesses?
From 1 April – 30 June 2025, Ofgem increased the energy price cap for domestic energy by 6.4 percent. While this specifically applies to household energy, and not businesses – this does not mean businesses are not affected by the energy market fluctuations.
The domestic energy price cap regulates the maximum amount suppliers can charge households for each unit of energy. Businesses operate in a non-regulated energy market, which means there is no maximum amount they can be charged for their energy usage, meaning they negotiate contracts with third party energy brokers or directly with suppliers.
However, the domestic price cap increase can have an indirect impact on business energy prices with:
- Increased wholesale prices indicating energy prices rising across the board which could also affect business energy contracts.
- Economic instability caused by higher household energy bills can lead to lower consumer spending, negatively impact businesses, especially those in retail and hospitality.
- Home based businesses will be exposed to higher energy bills as they will be directly affected by the domestic energy price cap increase.
Are business energy costs increasing for 2025?
The higher domestic price cap in 2025 may indirectly lead to an increase in small business energy prices. The energy prices for businesses differ based on the region they are based in. A recent BBC report reveals small and medium-sized businesses in north Wales and Merseyside are expected to pay 13% more in energy bills than London from April 2025 due to non-wholesale energy costs known as third-party charges.
Third-party charges differ from region to region and make up about 60% of a business’ overall energy bill. These include all electricity costs outside the price of the energy itself and are split into network charges like distribution and transmission costs, and policy costs such as funding for government initiatives like renewable energy.
How can businesses curb their energy spend?
With rising costs and tightened budgets on the horizon, there is a growing need for businesses to rethink their energy spending strategies.
Dr Craig Lowrey, principal consultant at Cornwall Insight said: “Now is the time for businesses to review their energy strategies, explore switching opportunities, and consider efficiency measures to help ease rising costs.”
In efforts to lower their energy bills, businesses have been switching their energy supplier or contracts in the past few years with the help of energy brokers.
However, what many businesses are unaware of is that their energy brokers may have been mis-selling them energy contracts with hidden commissions and overinflated costs. Legally, energy brokers have to disclose any commissions earned, but over the years many unscrupulous ones have made misleading statements or concealed their financial incentives.
Callum Thompson, CEO Business Energy Claims (BEC) highlights, “We know that every penny counts in the current business environment. Many businesses unknowingly pay more than they should due to hidden commissions and inflated prices from unscrupulous energy firms and brokers.
Our dedicated team of energy and litigation experts are here to help businesses identify if they’ve fallen victim to a mis-sold energy contract and work towards reclaiming the money they are owed. Contact us now to speak to a member of our team.