According to forecasts from Cornwall Insights, businesses will experience sustained pressure from energy expenses that remain significantly higher than pre-crisis levels for an additional two years.

Fluctuating global gas markets, coupled with the rising costs of maintaining and upgrading the energy grid, are projected to increase energy bills for small manufacturing entities, as well as larger retail and leisure businesses. On average, these costs are expected to rise by £200,000 per establishment, reaching just over £550,000 annually by 2026.

This rise represents an increase from current annual bills of approximately £540,000, although it is a decrease from the peak figures of nearly £1 million experienced in 2022, according to the energy consultancy.

Electricity prices remain closely linked to wholesale gas prices, which have become increasingly unstable since the onset of the Russian invasion of Ukraine. This volatility is partly attributed to the UK’s growing dependence on liquefied natural gas imports from the United States.

The burden of maintaining and managing the energy network has increasingly shifted to standing charges. While Ofgem has proposed reforms to the standing charge for households—shifting some costs to the unit rate—these changes do not extend to businesses.

Craig Lowrey, a principal consultant at Cornwall Insights, noted that the political conversation has largely centered on household energy expenses, neglecting the high costs faced by commercial entities, which he referred to as the “energy elephant in the room.” He added, “Numerous businesses, especially in retail, are confronting a more difficult landscape, struggling to stay afloat month-to-month. The implications could be extensive, leading to potential job losses, disrupted supply chains, and decreased consumer spending, effects that may reverberate throughout the wider economy.”

Household energy bills also remain significantly elevated compared to pre-Ukraine war levels, having risen by £12 a month in October to £1,717 after Ofgem adjusted the price cap. This cap limits the price per unit of gas and electricity as well as daily standing charges that suppliers can impose on customers with variable standard tariffs. Businesses, however, are expected to feel the impact of rising energy prices more acutely, as they are not protected by the price cap.

While the integration of more renewable energy sources into the grid is anticipated to lead to reduced bills over time, the consultancy cautioned that due to the time required to launch new projects, both residential and business consumers may not see the benefits for several years.

An Ofgem representative acknowledged the ongoing challenge of high energy bills for many businesses, stating: “We are collaborating closely with the government and industry to identify the range of challenges non-domestic customers encounter and to explore how we can better address these issues.”

Additionally, a spokesperson for the Department for Energy Security and Net Zero stated, “The recent significant surge in electricity prices resulted from rising global gas prices and dependence on volatile fossil fuels. The most effective way to shield billpayers from future price fluctuations and enhance Britain’s energy self-sufficiency is through the development of domestic clean energy, with a target for clean power by 2030.”