UK businesses hit by 250% increase in gas bills

Small and medium sized businesses have faced an average gas bill rise of more than 250% over the last year, according to new research.

Energy analysts Cornwall Insights found that average gas prices paid by SMEs increased by that amount during the first quarter of 2022 compared to the same period last year.

Wholesale market volatility is among the factors that has led to a huge jump in gas prices for all consumers. However, unlike domestic customers, businesses have yet to see dedicated government support to manage the record high energy bills.

The challenges for firms is compounded by some energy suppliers withdrawing tariff propositions at short notice, which makes it harder for businesses to get the contracts they need, and may lead to higher costs.

Delivered gas prices, one-year acquisition fixed tariff (Price SME customers pays minus
any commission, VAT & CCL)

Call for energy price cap for businesses

Craig Lowrey, senior Consultant at Cornwall Insight, said:

"Volatile wholesale pricing means finding a new contract as a business customer is even more difficult.

"With many businesses' supply contracts coming up for renewal in April, there is a significant risk that some will have no choice but to go on to out of contract rates for a period of time.

"The ones that find deals will still be left with a large increase in bills to contend with – with these costs ultimately being passed on to their customers, further impacting the high cost of living across the country."

There have been calls for an energy price cap for businesses, but Lowrey said although this may help in the short-term by protecting business consumers from upfront high costs, it could up end just deferring problems for a later date.

"There are also opportunities to look at the demand for gas rather than compensating businesses after the fact," he added.

"While many SMEs cannot simply reduce gas use, the current high prices mean that those companies with the ability to be flexible in their gas demand due to on-site investments will inevitably look to do so. Therefore, there could be an opportunity to give commercial incentives to those willing and able to reduce their gas use at certain times.

"High prices and volatility do not appear to be going away any time soon, and it is clear there are many levers to reduce gas prices for small and medium sized businesses that need to be explored. If the government does not want to see more businesses fail, higher product prices for consumers and resultant economic impacts, it will need to start giving them some attention."