Small businesses are paying THOUSANDS more in bills than before the energy crisis and costs will rise again

Small businesses are paying £5,000 more on their annual energy bills than they did at the start of the energy crisis three years ago, and prices are expected to rise again next year.

Wholesale energy prices have fallen since peaking in 2022-23 following Russia’s invasion of Ukraine, when a typical small business could shell out up to £20,000 a year.

However, data from energy analyst Cornwall Insight reveals they remain much higher than pre-2021 levels of £7,000 to £8,000 per year for an average small business, such as a pub, restaurant or independent retailer.

Their data, which is calculated from April to March to coincide with the time when most companies renew their contracts, shows that this figure is only set to rise further.

The energy consultancy predicts that annual electricity bills for small businesses will average £13,264 by April 2025 – 70 per cent higher than the £7,811 paid in 2020/21.

The exact amount a business will pay will depend on its energy supplier and tariff, where in the country it operates, and its overall energy usage.

Cornwall Insight’s forecasts are based on a typical use of 50 MWh of electricity per year, pegged at £239.338/MWh, or £3.55 per day.

In general, a micro-business employing between 1 and 10 people will have an average consumption of 5 to 15 MWh per year, while one with between 11 and 50 employees will use between 15 and 25 MWh, according to Uswitch.

Some businesses that have much higher energy consumption, such as a pub or restaurant, may consume more.

Energy costs for businesses are expected to rise next year as higher fixed charges and the impact of heightened tensions in Ukraine are reflected in bills.

Unlike household energy bills, businesses do not benefit from a price cap to protect them from rising bills.

Dr Craig Lowrey, Principal Consultant at Cornwall Insight, said: ‘Our business energy cost forecast shows that businesses are faring no better than households, with bills still substantially above historical averages.

‘While prices may have stabilised from their crisis peaks, they are far from sustainable for the many smaller businesses already struggling in this economic climate.

‘For all the criticism that the energy price cap for households has received, it provides a level of protection that businesses simply do not have.

‘Given the impact of the cost of living crisis on consumer spending and traditional trade, the government will need to seriously consider how to support businesses with their high energy costs if it is to avoid further closures.

Business groups have continually called on the government to increase energy bill support for small businesses, with Cornwall Insight calling on the government to “set out a sustainable, long-term energy plan”.

Last week, energy regulator Ofgem confirmed that average annual household bills would rise by 10 per cent from October.

The average household currently pays energy bills of £1,568 a year, with prices capped by Ofgem’s price cap, but this figure will rise to £1,717 from 1 October.