Businesses in the UK will see their energy bills rocket when new contracts are negotiated in October1 according to data from Cornwall Insight.
Some will face bills five times their current price, as concerns over Russian gas supply, tight electricity markets in Europe, and a global disruption to Liquified Natural Gas see prices spike.
Business energy prices have been surging for 15 months with increases proportionately higher than those experienced by households under the Default Tariff Cap (price cap). Those who negotiated two-year fixed price contracts in summer 2020, are potentially facing a substantial fivefold rise in October, with those renewing an annual contract due to see bills twice what they paid this year, which in turn was double what had been seen during 2020-21.
It is feared, higher energy costs could force business closures, with the corresponding job losses reverberating throughout the economy.
While the business energy markets have so far managed to cope with the price increases already experienced, it is feared that October’s increase in bills coupled with the other economic concerns being seen in the market, could tip businesses over the edge.
This is particularly true for certain firms whose profitability is most exposed to energy cost increases, including hospitality, leisure, retail and many in the industrial sector. Some of these sectors are concentrated in regions that have been positioned in the UK Government’s Levelling up agenda, which could damage any efforts to boost productivity and raise living standards in these areas.
Robert Buckley, Head of Relationship Development at Cornwall Insight said:
“Business energy prices have climbed considerably in the past 15 months, and they stand on the verge of another significant steep uplift when new contracts come in to place for the period from 1 October 2022."
1. Traditionally this date is the key anniversary for contracting fixed price contracts in the business electricity and gas supply markets
About the Cornwall Insight Group
Cornwall Insight is the pre-eminent provider of research, analysis, consulting and training to businesses and stakeholders engaged in the Australian, Great British, and Irish energy markets. To support our customers, we leverage a powerful combination of analytical capability, a detailed appreciation of regulation codes and policy frameworks, and a practical understanding of how markets function.