Thousands of small businesses across the UK remain trapped in costly fixed energy tariffs agreed in late 2022. Despite wholesale prices falling significantly, these firms are still paying rates set at last summer’s peak, leaving many with bills three to four times higher than before.
Why Are Bills Still So High?
The problem began when the Energy Bill Relief Scheme (EBRS) ended and was replaced by the Energy Bills Discount Scheme (EBDS). This new scheme offers only minimal discounts, which barely reduce the impact of soaring costs. Businesses that locked in fixed tariffs between July and December 2022, when prices were at record highs, are now facing crippling bills without meaningful government support.
Research from the Federation of Small Businesses (FSB) shows:
- 13% of small firms fixed their energy contracts during this period, paying up to £1 per kWh for electricity.
- Around 93,000 businesses could be forced to close, downsize, or restructure because of these costs.
Which Businesses Are Most Affected?
Accommodation and food services account for 28% of those stuck in expensive contracts, while wholesale and retail make up 20%. Nearly half of affected businesses say they cannot pass these costs on to customers, who are already cutting back due to the ongoing cost-of-living crisis.
Mis-Selling by Energy Brokers
There is growing concern that some energy brokers mis-sold contracts, prioritizing high commissions over fair pricing. Many businesses were locked into long-term deals at inflated rates, leaving them exposed for years. According to Ofgem, companies using brokers are at greater risk of being mis-sold because of poor transparency around commissions.
What Needs to Change?
The FSB is urging energy suppliers to allow businesses to renegotiate fixed contracts at a blended rate, somewhere between the original fixed price and current wholesale rates. This option should be automatically available to businesses that:
- Signed contracts between July and December 2022.
- Have rates above the EBRS wholesale price cap.
- Can confirm contract end dates showing prolonged exposure to high prices.
Why This Matters
As the UK economy works toward recovery, thousands of small businesses remain in survival mode due to energy costs. Without intervention, more closures could follow, adding to the 500,000 small businesses lost during COVID. Transparency and fairness in the energy market are essential to ensure affordable energy and support economic growth.
Could Your Business Claim Compensation?
If your business signed a fixed energy contract in the last six years, you may be entitled to thousands in compensation due to hidden broker commissions.
Check if you have a claim today.