If you’re a business owner or director then you’re used to juggling complex challenges – often several at once.
Unfortunately this now includes your business energy bills.
What was once a predictable and manageable operational expense can now be a critical factor when previously viable businesses are considering insolvency.
So if barely surmountable energy bills are eroding your company’s financial stability – it’s imperative to understand all available options including the difficult but sometimes necessary options that insolvency can provide including CVAs, administration or voluntary liquidation.
The unrelenting pressure of Energy Costs on UK Businesses
The main factors driving higher energy prices – global supply constraints, geopolitical instability and the ongoing transition to greener energy – are not short-term blips anymore.
For many businesses, these elevated costs have become a fixed, significant and occasionally unbearable overhead. Strategies such as energy efficiency, renegotiating contracts (where possible) and exploring any available government support are initial steps but there may come a point where not even these measures are enough to ensure a company’s long-term survival.
Energy rates have so far been relatively flat across 2025 although wholesale prices dropped in February. There has been nothing like the price volatility seen in 2022 and 2023 and the drop in the latest energy price cap review suggests that prices will continue to fall in the short term.
Prices remain considerably higher than before the 2022 price spike and with no cap on business energy rates, companies should still look to fix their energy rate contracts to make sure they don’t slip onto suppliers’ out-of-contract rates which can be up to 35% more than what you’d pay on a fixed contract.
From April 1st 2025 to June 30th, the energy price cap for domestic users is set at £1,849 per year. This will fall by 7% from July 1st to September 30th with suggestions that prices could fall further still before rising again in January 2026.
Why are business energy prices so high? A recap.
The main reasons why prices continue to remain higher than pre-pandemic levels include:-
- Government support schemes for business such as the Energy Bills Discount Scheme which ran from 2022 to 2024 have finished and there is no direct replacement.
- The invasion of Ukraine; lower renewable generation levels, UK storage shortages and supply chain disruptions have all contributed to keeping energy costs high along with global gas prices and oil markets still have a big influence on UK energy bills.
- Energy suppliers hedging (buying in advance) to protect against price volatility. This means that current bills are often based on previously higher purchase prices. Suppliers also factor in risk which keeps prices higher even as the wholesale market falls.
The latest Ofgem and ICIS forward delivery contract rates – the wholesale prices that suppliers typically pay for the energy they supply to customers are*:-
- Wholesale gas costs around 102p per therm (around 29 kWh)
- Wholesale electricity costs around £88 per MWh (1,000 kWh)
Additionally the latest day-ahead contract rates are:-
- Wholesale gas costs around 125p per therm (around 29 kWh)
- Wholesale electricity costs around £105 per MWh (1,000 kWh)
Day-ahead rates are considerably higher – this higher wholesale cost is reflected in higher variable and out-of-contract rates which is why fixing rates provides more certainty.
*As at time of publication
When does “too high” become untenable?
High energy costs could be just one of the contributing factors to pushing a business into the financial danger zone. There are several other key indicators that a company is experiencing difficulties.
- Persistent cash flow issues – is it increasingly difficult to pay your gas and electric bills on time as well as your suppliers, staff and HMRC?
- Erosion of profits and reserves – are they dwindling faster than you can replenish them? This is assuming you have cash reserves too. If you don’t then your firm is more susceptible to sudden and unexpected shocks.
- Running just to stand still – Is the company borrowing money just to keep the lights on without a clear plan or path to repaying the debt through profit?
- At risk of wrongful trading – Directors should know that if there is no reasonable prospect of a company becoming profitable or trading while insolvent then they are committing an offence.
While the reduction in the domestic price cap will be welcome for most directors and business owners – they all live in homes too! – their businesses are still vulnerable to any future shocks or the foreseeable increase in demand that winter will bring.
But there’s time now to make plans and act on them before the weather turns.
Our advisors will work with you to discuss your aims and goals and then look at how they can best be achieved. The sooner advice is taken and implemented, the more options are usually available.
Once plans are in place, they can be amended or tweaked if they end up achieving goals ahead of schedule – but only if you take the important step and get in touch first.