Businesses across the UK are being hit by a fresh surge in energy costs as wholesale markets react to disruption in the Middle East, with sharp increases feeding through just as many firms come to renew contracts.
Electricity prices have risen by between 10% and 30% since late February, while gas costs have climbed far more steeply, with forecasts suggesting increases of between 25% and 80% depending on sector and exposure.
For a typical small industrial or commercial business, that now translates into an average annual electricity contract of £578,000, up £96,000 in a matter of weeks, while gas bills have surged by £376,000 to just over £1.02 million.
The scale of the jump is not just about headline numbers, it is about timing. April is one of the busiest periods for contract renewals, meaning many businesses are being forced back into the market at precisely the moment suppliers are pulling fixed tariffs, repricing deals more frequently and adding risk premiums to reflect uncertainty.
Companies that depend on predictable energy costs to plan operations and investment are finding the options narrowing as prices move against them.
At the root of the spike is the disruption to global energy flows, particularly LNG shipments through the Strait of Hormuz, which has pushed up wholesale prices as traders factor in the risk of further supply shocks.
Unlike households, which are partially shielded by the energy price cap, businesses face the full force of the market in real time, with no mechanism to soften the immediate impact.
Some firms are better protected than others. Larger organisations that hedged their energy purchases months or years in advance are insulated from short-term volatility, while those that locked in contracts earlier in the year or invested in on-site generation have reduced their exposure.
For many smaller businesses or those coming to market now, however, the increase is unavoidable and immediate.
Jacob Briggs, Energy Users Lead at Cornwall Insight, said: “Since the start of the month, business energy bill forecasts have soared. Many of these companies are already battling slimmer margins, so this rise in energy costs is not something they can simply absorb.”
He added: “There is no real safety net for businesses when the wholesale market spikes… companies are left with few viable choices.”
The concern is not just the level of prices but the instability behind them, with rapid movements making it harder for businesses to plan, invest and grow at a time when economic conditions are already tight.
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