Due to a range of factors from lower wind energy generation to high gas costs, wholesale energy costs massively increased in late 2021. The situation has been made worse by the war in Ukraine and the economic and market uncertainty triggered as a result. And the consequence of all of this for UK businesses and residents is higher energy bills in 2022.
As it stands, competitive energy deals on comparison websites are a thing of the past. The energy price cap, which is the maximum amount consumers can be charged on a variable dual fuel tariff over six months – has risen to a record level of nearly £2,000 as of 1 April 2022.
So, leaving a bad deal for a good deal isn’t currently an option. All of this has small businesses wondering what to do next.
Is it worth switching energy suppliers?
Essentially, no UK energy supplier can currently offer attractive fixed-term deals. When the energy crisis first erupted in 2021, many suppliers folded – and many more remain vulnerable.
However, the situation for some small businesses could be a little different. It comes down to usage. If you’re a high-usage business, like a restaurant, your average energy bills would be much higher than the price cap anyway.
So, for small businesses like this concerned about their bills and variable rate tariffs, it’s still worth using a comparison site to see what deals you can get.
Are businesses any better off than residents?
In short, not really. Energy analysts have revealed that in the last year the average small business’ gas costs have risen by an extraordinary 250%. And unlike domestic customers, the government hasn’t yet confirmed any support for companies struggling to pay their bills.
However, the one saving grace is that in some instances a fixed-deal that does offer better value for money could be on offer. The problem of course, is that higher usage businesses are also far more vulnerable to variable-rate hikes.
Is there a price cap for businesses?
There isn’t a price cap for businesses yet – but some people are pushing the government to introduce one. However, the domestic market has had a price cap for many years, and as this situation has demonstrated, it offers little protection from extreme market volatility.
The debate will continue, but what’s really needed is financial support or intervention from the government.
Is the situation likely to improve?
Wholesale energy prices, which drive domestic and business energy prices, are always fluctuating. That’s because so many different global factors can influence them. From Covid to Brexit, colder winters to geopolitical tensions, we all feel the pinch when the unexpected happens. But that same principle of constant volatility suggests that prices will come down – eventually.
Experts believe the current high prices will remain for some time, but that later in the year we could see the first signs of reduced prices. However, that relies on some global stability – and currently, the world is anything but stable.
The other question is what action the government takes. The elephant in the room is that the biggest energy companies are still reporting significant profits, having collected tens of thousands of new customers from smaller energy suppliers that closed.
The government clearly doesn’t want to intervene and disrupt the energy giants. But if domestic and business customers can’t pay their bills, something will have to change. The bottom line is the situation won’t, and can’t, remain the same indefinitely.
So, what should I do about my energy bills?
The current price cap has risen by more than 54%. But it’s expected that it will rise again by around 24% in October 2022, before any signs of improvement arrive. Currently, all comparison sites and energy deals reflect this situation – they’re sky-high and offer no savings vs variable rate tariffs that you’re likely already on.
It’s important to keep an eye on the situation. Everything is unpredictable, and it’s still possible that some suppliers might take the risky option of offering better-priced fixed-term energy deals. But fixing a deal during a period of so much uncertainty, when wholesale prices are so high, doesn’t make much sense.
For now, experts like Martin Lewis are suggesting that residents and small businesses sit tight and monitor the situation. Don’t switch unless clear savings are on offer through a fixed deal.
In the meantime, it sounds obvious but start monitoring your energy use carefully. Invest in energy-efficient equipment and get the basics right like turning off power when something isn’t in use. When prices are this high, turning the light off really does matter. And if you are struggling to pay your bills, there is support available. Ofgem, the UK’s energy regulator, has support schemes available here depending on your situation.
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