Since the end of 2021, companies across the UK have suffered from soaring energy costs.
Although there are tentative signs of easing in the energy market, businesses are bracing themselves for the end of government support in April.
This article will explore what is next for business energy costs and what companies can do to mitigate the energy crisis.
Why has the cost of business energy risen so sharply?
In 2006, dwindling output from the North Sea gas fields resulted in the UK losing its energy independence.
A large portion of the electricity used in the UK comes from gas-fired power plants that burn gas imported from the European mainland.
The cost of energy started to climb as Russia prepared for war with Ukraine in late 2021.
Russia is the world’s biggest natural gas producer, and tit-for-tat economic sanctions prompted Russia to shut off its key Nord Stream 1 pipeline to Europe. The throttling of gas supply into Europe sent business gas rates soaring.
Despite a desperate scramble by the UK to increase its own energy production (the planned Whitehaven coal mine being an example), at least for the next few years, European gas prices will dictate the cost of business energy.
What will happen next for business energy prices?
In the first two months of 2023, the wholesale cost of electricity and gas has eased slightly due to an unseasonably warm winter.
However, this will be of little comfort to businesses because the government’s Energy Bill Relief Scheme is about to end. Since October, the government intervention has automatically discounted energy rates for businesses to the same cost per kWh that households are currently paying.
The Energy Bill Relief Scheme ends in March 2023 and will be replaced by the significantly less generous Energy Bill Discount Scheme.
What can businesses do about the cost of energy?
For the last six months, the government support meant that it didn’t really matter what business energy tariff you had – either way, you were receiving the government discount.
In April 2023, this will become important. The price difference between a ‘good’ business energy deal and a ‘bad’ one is huge.
To prepare for the end of the government support, we recommend shopping around and arranging a new fixed-rate energy contract.
Over 50 business energy suppliers compete to offer the best prices, so we recommend using a business gas comparison or business electricity comparison service to get multiple quotes for your company quickly.
A fixed-rate energy tariff will lock your business into a unit rate per kWh of energy, protecting your company against future energy price volatility.
