The energy storm about to hit small businesses

When household energy bills dropped 6.6% on 1 April to £1,641 for a typical home, families across Britain breathed a small sigh of relief. But for the UK's five million small businesses, there was no reprieve, and experts warn the worst is yet to come. 

The Ofgem energy price cap dropped to £1,641 for Q2 (April to June), a 6.6% decrease. The fall was largely driven by the government scrapping the Energy Company Obligation levy and moving green levies to general taxation in the Autumn Budget, saving a typical household around £150 a year. 

However, this cut did not apply to business energy bills. And the July cap, which Ofgem will announce by 27 May, is forecast to jump sharply in the other direction. 

What's coming in July

Cornwall Insight, one of the most closely watched energy forecasters, now places the July price cap at approximately £1,871 for a typical household. That's a rise of around £230, or 14%, from the current level. Before the Iran conflict began, Cornwall Insight had forecast the July cap at £1,645, essentially flat. The entire increase is conflict-driven. 

Cornwall Insight's Craig Lowrey has said the increase is "pretty much unavoidable" because the observation period Ofgem uses to set the July cap runs from mid-February to mid-May. The war-driven wholesale price spike is already baked into most of that window. 

The ceasefire hasn't fixed it

On 8 April, Trump announced a two-week ceasefire with Iran, including a commitment to reopen the Strait of Hormuz. Oil fell 14% to $93 a barrel, and markets surged. But by 9 April, Brent crude had already rebounded to around $98, with fewer than half a dozen ships observed transiting Hormuz. 

The CEO of Abu Dhabi National Oil Company posted on LinkedIn:

"The Strait of Hormuz is not open. Access is being restricted, conditioned and controlled." 

The EU's Energy Commissioner has said:

"Even if that peace is here tomorrow, still we will not go back to normal in the foreseeable future." 

Why this hits businesses harder than households 

The Ofgem price cap protects households on standard variable tariffs. It does not apply to business energy contracts. Business energy is priced directly from wholesale markets, which have been in turmoil since late February.

Wholesale gas remains well above pre-conflict levels. Before the war, UK gas prices sat in the mid-70s pence per therm. They spiked sharply through March and, while the ceasefire brought some relief, they have not returned anywhere close to pre-war levels. 

On top of wholesale volatility, businesses face rising non-commodity costs that households are being shielded from. The Renewables Obligation levy cut in the Autumn Budget applied to household bills only.  

Cornwall Insight's own analysis confirms that "unlike households, costs are still expected to rise for many businesses from April." 

Non-commodity costs, including network charges, levies and policy costs, now make up nearly 60% of a typical business electricity bill.  

Transmission charges (TNUoS) are forecast to roughly double between 2025-26 and 2026-27 for some businesses. These are pass-through charges, meaning they can hit even businesses on fixed contracts. 

There is no government support scheme for small businesses 

 Unlike the 2022 Ukraine crisis, which triggered the Energy Bill Relief Scheme and the Energy Bills Discount Scheme, the government has announced no equivalent support for small businesses in response to the Iran conflict. 

The British Chambers of Commerce (BCC) published a report in February called Powering Growth, calling on the government to fund at least part of the Renewables Obligation on business energy bills, matching the relief already given to households, and to establish a national business energy advice scheme.  

The BCC warned that the ripple effects of rising energy costs "will be particularly damaging for SMEs." 

However, the new British Industrial Competitiveness Scheme (BICS) is set to be launched soon. It aims to reduce electricity costs by c.£35-40/MWh for over 7,000 manufacturing frontier industries within the Industrial Strategy’s growth sectors (the ‘IS-8’), and foundational manufacturing industries which provide key inputs to the frontier industries. 

This doesn't land in isolation 

Energy is not the only cost rising this month. From April, businesses are also absorbing: the National Living Wage increase to £12.71, higher employer National Insurance contributions, new business rates bills following the revaluation and multiplier changes, day-one SSP obligations, and doubled Corporation Tax late filing penalties. 

The Institute of Directors' business confidence index fell to a record low in the final week of March. Butlins has announced a consultation on 250 job cuts, citing £13 million in additional costs from wages, NI and business rates. The Food and Drink Federation has warned grocery inflation could reach 9% or more by year-end. 

What to do now 

• Check when your business energy contract ends: If you're approaching renewal or already out of contract, you could be paying 30-70% more than a fixed deal. Compare suppliers now rather than waiting. 

• If you're on a fixed contract, check whether TNUoS and other non-commodity charges are treated as pass-through costs. If they are, your bill may still rise even though your unit rate is locked. 

• Review your energy use: Even small changes, shifting high-use processes away from peak hours, cutting standby consumption, or investing in LED lighting, can reduce exposure. 

• If fuel is a significant cost for your business, note that the 5p fuel duty cut has been extended to 31 August 2026, but step-ups of 1p, 2p and 2p follow in September, December and March. 

• Factor the July price cap rise into your cash flow planning now. If you supply households, your customers will have less to spend from July onwards. 

The Enterprise Nation view 

Polly Dhaliwal, chief operating officer of Enterprise Nation, said:  

“We welcome the household levy cuts that brought April bills for consumers down because customer confidence obviously impacts small firms. But the gap between household and business energy support is now a real problem for our members.

"The government moved green levies off household bills. It has not done the same for businesses. Every café, salon, workshop and shop is absorbing those costs in full, on top of everything else that landed this month. 

“If the government wants small businesses to absorb rising wages, higher NI and a new business rates structure, it cannot also leave them fully exposed to an energy shock with no support and no route to cheaper bills. 

“The time to act on business energy support is now, not after the next crisis point." 

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