Business Energy Costs
Business energy costs have increased by 25% in 2026, according to Cornwall Insight's Business Energy Cost Forecast
Business energy bills have increased by 25% in 2026, with a typical average 12-month electricity contract for small industrial and commercial businesses now costing more than £630,000. This increase is the highest in almost four years, driven by geopolitical shocks, sweltering weather, regulatory shifts, and levies.
Causes of the Increase
The conflict in the Middle East has pushed wholesale prices higher, with European gas storage operators struggling to refill stocks ahead of winter. Heatwaves across Europe have also added costs to businesses due to energy used for air conditioning and cooling. Jacob Briggs, Energy Users Lead at Cornwall Insight, states that gas prices have been climbing over the past six months, largely driven by the ongoing conflict between the US and Iran.
Levy Increases
The research notes that Government support for business is largely focused on energy-intensive industries, although focus will widen in 2027. Two policy levies placed on non-domestic energy bills increased in April 2026 - the Climate Change Levy (CCL) and the Transmission Network Use of System (TNUoS) Demand Residual (TDR) charge. The CCL applies to energy supplied to commercial, industrial and agricultural energy users, with rates increased from £0.00775/kWh for gas and electricity to £0.00801/kWh.
Impact on Businesses
The increase in energy costs will continue to weigh on investment decisions, making it hard for businesses to commit to expanding when they have no idea what their energy bill will look like next year. Businesses who keep an eye on where prices are heading are in a much stronger position to plan around it, whether that’s locking in contracts early or looking at on-site generation to take back some control over costs. The TDR charge increase could see some businesses face a £75,000 year-over-year increase, with medium-sized businesses potentially facing increases of more than 65% compared to 2025 levels.
| Levy | 2025 Rate | 2026 Rate | Increase |
|---|---|---|---|
| CCL (gas) | £0.00775/kWh | £0.00801/kWh | 3.4% |
| CCL (electricity) | £0.00775/kWh | £0.00801/kWh | 3.4% |
| LPG | £0.02175/kg | £0.02175/kg | 0% |
| Solid Fuels | - | - | inflation rate |
Cornwall Insight's research notes that the same increase is playing out in gas, with costs for small business sites expected to increase by 25% to £1.15mn. Many businesses have contracts renewing in October, and will be locking in contracts at a worse rate than expected. The UK's exposure to high energy costs is in part due to a reliance on gas imports, and the government is exploring commercial support schemes to assist with gas capacity.
