Energy costs remain an important consideration for UK businesses, with wholesale energy prices continuing to be affected by volatility in global markets.
Ofgem has announced a 4% increase in the energy price cap for the period from 1 October to 31 December 2026. The increase reflects higher wholesale gas prices, with ongoing geopolitical tensions in the Middle East contributing to continued uncertainty in global energy markets.
The changes also include the Government’s removal of VAT from domestic electricity bills.
What does the price cap mean?
It’s important to note that the Ofgem price cap does not apply directly to businesses. The cap applies to domestic customers on standard or default energy tariffs, rather than commercial energy contracts.
The price cap limits the maximum unit rates and standing charges that energy suppliers can charge eligible households. It is reviewed and updated every three months to reflect changes in the underlying costs of supplying energy.
Around 22 million households are protected by the price cap.
Could businesses still be affected?
Although businesses are not covered by the price cap, changes in wholesale energy prices can have an indirect impact.
If wholesale gas and electricity costs remain elevated, suppliers may reflect those increased costs in the prices offered through commercial energy contracts. Businesses could therefore see higher energy bills when renewing or negotiating their contracts.
For energy-intensive businesses in particular, even relatively small changes in unit costs can have a noticeable effect on overall operating costs and profit margins.
What should businesses do?
With energy prices remaining unpredictable, businesses should factor potential increases into their budgets and cashflow forecasts.
It may also be worth reviewing your current energy contract, comparing available tariffs when your contract is due for renewal, and considering how energy costs are reflected in your pricing.
For businesses already facing pressure on margins, rising energy costs are another reason to keep a close eye on profitability and cash flow.
If you’re concerned about the impact of rising energy and other operating costs on your business, we can help. We can review your cashflow forecasts, margins and pricing to help you understand how changes in costs could affect your profitability and plan accordingly.
