UK Businesses Face 80% Energy Bill Surge Amid Iran War Price Shock
British companies are bracing for gas bill hikes of up to 80% as the ongoing conflict in Iran and significant disruption to key global shipping routes send wholesale energy prices soaring, according to industry experts. This alarming forecast comes at a critical time, with April traditionally marking a major month for businesses to roll off fixed-rate energy contracts.
Sharp Increases in Gas and Electricity Costs
Cornwall Insight, a leading energy consultancy, has revealed that many businesses are set for painful increases in their gas and electricity tariffs starting from April. This period coincides with a busy month for energy contract renewals, and there is no price cap in place to protect firms from these market fluctuations.
The group forecasts that since the war began in late February, electricity costs for businesses have surged by between 10% and 30%, while gas prices have experienced an even more dramatic rise, increasing by between 25% and 80%.
April Contract Renewals Compound the Crisis
April is traditionally a significant month for companies to transition from fixed-rate energy contracts, which is now coinciding with the energy price shock triggered by the Middle East conflict. This dual pressure has caused many energy suppliers to withdraw cheaper deals and raise tariffs aggressively.
According to Cornwall Insight, the average 12-month electricity contract for small industrial or commercial firms—such as larger retail and leisure sites or small manufacturers—would now cost approximately £578,000. This represents a 20% increase since early February.
Meanwhile, gas bills for these same companies have risen by nearly 60%, reaching an average of just over £1.02 million per year.
Expert Warns of Severe Business Impact
Jacob Briggs, energy users lead at Cornwall Insight, emphasized the severity of the situation. "Since the start of the month, business energy bill forecasts have soared," he stated. "Many of these companies are already battling slimmer margins, so this rise in energy costs is not something they can simply absorb."
Briggs warned that for some firms, these increased costs could mean the difference between investing in growth this year or shelving their plans entirely. For others, high bills could force very difficult economic decisions, potentially threatening their viability.
Smaller Firms Particularly Vulnerable
While large corporations often secure their energy prices through hedging deals arranged months or even years in advance, smaller businesses are left exposed to these sudden market spikes. Briggs highlighted that the Government must urgently explore ways to support firms with energy costs, as "there is no real safety net for businesses when the wholesale market spikes."
He added, "When fixed offers disappear and suppliers start pricing in uncertainty, companies are left with few viable choices." This lack of protection places additional strain on an already challenging economic environment for UK businesses.
The combination of geopolitical instability in the Middle East and traditional contract renewal cycles has created a perfect storm for business energy costs, with significant implications for the UK economy as firms grapple with these unprecedented increases.
