Some businesses will face energy bills five times higher than they’re currently paying from October, according to new analysis from Cornwall Insight.
Energy bills for businesses have surged over the last 15 months and particular through the first half of 2022 as wholesale prices have spiked due to concerns over Russian gas supply, tight electricity markets in Europe and a global disruption to Liquified Natural Gas (LNG).
As such, those whose two-year fixed price contracts are set to come to an end could face a fivefold increase, while those renewing an annual contract are likely to see their bills double.
“Business energy prices have climbed considerably in the past 15 months, and they stand on the verge of another significant steep uplift when new contracts come in to place for the period from 1 October 2022,” said Robert Buckley, head of relationship development at Cornwall Insight.
“Logic dictates that there can only be so long that so many businesses can pay so much more for their energy without knock-on consequences for themselves, their suppliers, and the wider economy, and if we at Cornwall Insight are correct there will be no return to 2020-21 wholesale prices before 2030. Despite this, in contrast to households, there has been strikingly little said about the affordability of business energy bills.”
Concern around the impact of surging energy bills has been widely covered, with charities and industry calling on the government to do more to protect customers ahead of the price cap jump in October.
Cornwall Insight is predicting that the price cap will jump to £3,359 in October, a figure that is expected to push millions in Britain into fuel poverty.
But according to Buckley, we also need to look at the impact of surging bills on businesses and how the energy crisis will affect them.
“This is not only to ensure we don’t see loss of output, but so we don’t see companies with heritage, roots in their communities and otherwise good prospects washed away. Such an outcome would have consequential impacts on real people and families not just company balance sheets and GDP statistics. Yet the level of action by government is surprisingly small given their wider economic agenda could be at stake,” Buckley continued.
“We are simply not having the essential conversations in Great Britain on relief for, or of, structured energy savings from businesses. We must ask ourselves whether we should be following the example of countries such as Germany, who are talking about the potential for rationing energy and taking energy savings measures now.”
Higher energy costs could lead to businesses shuttering and job losses, with certain firms such as those in hospitality, leisure, retail and many in the industrial sector particularly exposed.
“But what else can be done?,” finished Buckley.
“Opening a scheme where businesses could get paid to not use energy at peak times would be a start. After all we know what triggers winter demand peaks even if we do not know exactly when they will occur. Not only could such a scheme properly value demand response but there would be significant carbon savings too as fossil fuel generation would not need to run.”
