Business Electricity Costs In The UK: 2026 Guide

Business electricity remains a significant operating expense for UK companies, particularly businesses that rely heavily on refrigeration, heating, manufacturing equipment, machinery, lighting or IT infrastructure.

The amount a company pays depends on much more than electricity consumption alone.

Unit rates, standing charges, contract type, business size, meter type, location, network charges, taxes and the timing of a contract renewal can all influence the final bill.

Government figures for April to June 2026 show that the average electricity price paid by UK non-domestic consumers was 24.51p per kWh including the Climate Change Levy.

This was 2% higher than the same quarter in 2025. However, prices vary considerably between different business sizes and contracts.

Understanding how these charges work makes it easier to budget, compare suppliers and identify realistic opportunities to reduce business electricity costs.

How Much Does Business Electricity Cost In The UK In 2026?

The latest official government statistics put the average non-domestic electricity price at 24.51p per kWh in the second quarter of 2026, including the Climate Change Levy.

The figure covers businesses of different sizes across the UK and should therefore be treated as a national benchmark rather than the price every business will receive from a supplier.

A business signing a new contract could receive a rate above or below this figure depending on market conditions and its individual circumstances.

For example, electricity prices may be affected by:

• Annual Consumption: Larger electricity users can have different pricing structures from small businesses.
• Contract Timing: Wholesale market conditions when a contract is agreed can affect the rate.
• Location: Network and distribution costs differ across Great Britain.
• Credit Profile: Suppliers may consider the financial risk associated with a customer.
• Meter Type: Half-hourly and other commercial meters can have different charging arrangements.
• Contract Length: Longer fixed agreements can provide certainty but may not always deliver the lowest long-term cost.
• Usage Pattern: Businesses consuming large amounts at particular times may have different costs from those with steady demand.

The government figures also show why businesses should be cautious about relying on a single advertised price.

Many companies are on fixed contracts that were negotiated at different points in the wholesale market, meaning price movements do not affect every business at the same time. 

Average Business Electricity Costs By Business Size

There is no single electricity bill that represents every small, medium or large business.

A small office using laptops and lighting may consume relatively little electricity, while a restaurant, convenience store or workshop of a similar physical size could use substantially more.

Using the latest official 24.51p per kWh non-domestic average as a simple illustration, electricity consumption alone could produce the following costs:

These figures are illustrative electricity-use costs rather than complete annual bills. Standing charges, VAT and other applicable charges can increase the amount ultimately paid.

Official statistics also show that electricity prices vary by consumption band. Very small businesses can pay a different average rate from larger industrial users, which means simply multiplying consumption by a national headline rate will not precisely predict an individual company’s bill. 

What Makes Up A Business Electricity Bill?

A commercial electricity bill usually contains several different costs rather than one simple electricity charge.

Some costs are directly visible on the bill, while others are incorporated into the supplier’s unit rate or contract price.

Unit Rate And Standing Charge

The unit rate is the amount charged for each kilowatt-hour of electricity consumed.

For example, if a business uses 20,000 kWh during the year and pays 25p per kWh, the electricity consumption element would be:

20,000 × £0.25 = £5,000

The standing charge is normally a daily charge associated with maintaining the electricity supply. It can apply regardless of whether the business uses electricity that day.

A business with relatively low electricity consumption should therefore look carefully at standing charges.

A tariff advertising a cheaper unit rate may not necessarily produce a lower total bill if its standing charge is considerably higher.

Other underlying electricity costs can include:

• Wholesale Electricity Costs
• Electricity Network Costs
• Metering Costs
• Supplier Operating Costs
• Environmental And Policy Costs
• Supplier Margin

Ofgem has explained that wholesale energy can represent around 40% of a business electricity bill, although the actual proportion varies between customers and contracts.

VAT And Climate Change Levy

Most electricity supplied for normal commercial use is subject to VAT at the standard rate.

Different treatment can apply where electricity qualifies for relief, including certain supplies involving charitable non-business use and small quantities.

There has also been an important 2026 VAT change. From 1 October 2026 to 31 March 2027, qualifying supplies of electricity in Great Britain are temporarily subject to a zero rate of VAT.

This does not mean ordinary business electricity has become VAT-free. Businesses need to meet the qualifying-use rules for the relief to apply. 

Businesses may also pay the Climate Change Levy, commonly known as CCL.

From 1 April 2026, the main CCL rate for electricity is:

0.801p per kWh

The scheduled rate from 1 April 2027 is 0.827p per kWh. Businesses covered by qualifying Climate Change Agreements may receive substantial reductions in the levy. 

What Affects Business Electricity Prices?

Business electricity prices are determined by a combination of market conditions and business-specific factors.

One major factor is the wholesale cost of electricity. Suppliers purchase energy from wholesale markets and changes in those markets eventually influence commercial tariffs.

Network costs are another important component. Businesses contribute towards maintaining, operating and upgrading the electricity infrastructure used to move power around the country.

Other factors include:

• Business Location: Distribution charges can vary according to where the premises are located.
• Electricity Consumption: The volume of electricity used can influence tariff structure and pricing.
• Demand Pattern: When electricity is consumed can matter, particularly for larger businesses.
• Contract Type: Fixed and variable agreements expose companies to different pricing risks.
• Contract Renewal Date: Two similar companies could pay different rates simply because they negotiated contracts at different times.
• Metering Arrangement: Smart meters and half-hourly meters can provide more detailed usage information and may affect commercial pricing arrangements.
• Supplier And Broker Charges: Supplier margins and any broker commission included within the contract can influence the final cost.

Businesses should therefore compare the total expected annual cost, rather than choosing a supplier solely because it advertises a low unit rate.

Why Have Business Electricity Costs Changed In 2026?

Business electricity prices remain affected by several competing pressures.

Government statistics show that average non-domestic electricity prices increased by 2% year on year in the second quarter of 2026, reaching 24.51p per kWh including CCL. They were also 1.5% higher than in the first quarter of 2026. 

One reason commercial prices can behave differently from headline wholesale prices is that many companies are locked into fixed agreements.

Suppliers and businesses negotiate these contracts at different times, so changes in wholesale prices may take months or years to work through to individual customers.

Ofgem also highlighted increased electricity network costs from April 2026 as infrastructure investment continues.

Wholesale energy prices have remained volatile as well, meaning businesses approaching a contract renewal can face very different market conditions from those already protected by longer fixed agreements.

This makes contract timing increasingly important when comparing business electricity costs.

What Are The Latest Government Updates On Business Electricity Costs?

One of the most significant developments in 2026 is the introduction of the British Industrial Competitiveness Scheme.

Applications for the first year opened on 1 October 2026 and close at 11:59pm on 30 November 2026.

The scheme is aimed at eligible manufacturing businesses in Great Britain and is expected to support more than 10,000 businesses. 

Eligible businesses will receive exemptions from certain electricity policy costs.

The planned timetable includes:

• April 2027: Renewables Obligation and Feed-in Tariff exemptions begin.
• October 2027: Capacity Market cost exemptions begin.
• 2027: Eligible manufacturers are also expected to receive a one-off electricity bill credit, with further details to be confirmed.

For the first application round, qualifying manufacturing sites must generally meet the specified industry and product classifications and consume at least 33 MWh of grid electricity annually. 

Another 2026 change affects existing support for some energy-intensive industries. Network charge compensation available through the British Industry Supercharger has increased from 60% to 90% for eligible costs from 1 April 2026. 

These measures are targeted primarily at qualifying manufacturers and energy-intensive businesses. They are not general electricity discounts available automatically to every UK company.

Are There Government Schemes To Help Businesses With Electricity Costs?

Government help with electricity costs in 2026 is mainly targeted support, rather than a universal scheme covering every business.

The main forms of assistance include:

British Industrial Competitiveness Scheme

This is aimed at qualifying manufacturers and will reduce certain electricity policy costs from 2027. Businesses need to meet the scheme’s eligibility requirements and apply during the relevant application window. 

British Industry Supercharger

This provides significant electricity-cost relief to eligible energy-intensive industries. Support includes exemptions from several policy costs and compensation covering up to 90% of qualifying network charges.

Energy-Intensive Industry Compensation

Certain electricity-intensive businesses exposed to indirect carbon costs may qualify for compensation connected with the UK Emissions Trading Scheme and Carbon Price Support mechanism. Eligibility depends heavily on the industry and products involved. 

Local Energy Efficiency Funding

Some councils and regional programmes provide grants, audits or financial support for measures such as improved heating, insulation, efficient equipment, renewable generation and energy management systems.

Funding varies significantly by location and may open or close during the year. Ofgem advises businesses to check local authority programmes and ask their supplier whether grants or other energy-efficiency support are available. 

For most ordinary SMEs, reducing consumption and securing a competitive contract therefore remain more widely available options than direct government bill subsidies.

Fixed, Variable And Out-Of-Contract Electricity Rates

The type of electricity contract a business uses can significantly affect its costs.

A fixed-rate contract normally fixes unit rates and standing charges for an agreed period. This provides greater budget certainty because the contracted rates do not immediately change when wholesale electricity prices move.

A variable-rate contract allows electricity prices to increase or decrease during the contract.

A business may also fall onto an out-of-contract rate if a fixed agreement expires without a new deal being arranged.

Businesses moving into premises without agreeing a formal electricity contract can automatically be supplied under a deemed contract.

Ofgem warns that deemed and out-of-contract rates are usually more expensive than negotiated contracts. 

Businesses should therefore record their electricity contract end date well in advance and begin reviewing available options before the existing agreement expires.

Is There A Price Cap On Business Electricity?

The domestic energy price cap does not protect business electricity contracts.

Ofgem’s price cap applies to eligible domestic customers on certain tariffs. Businesses, charities and other customers using non-domestic energy contracts do not receive the same protection. 

This means commercial electricity rates are mainly determined by the contract agreed between the business and supplier.

Businesses should therefore check:

• Unit Rates
• Standing Charges
• Contract Length
• Termination Conditions
• Renewal Arrangements
• Broker Fees Or Commission
• Out-Of-Contract Rates

Companies should also be cautious when agreeing contracts verbally. Ofgem states that business energy contracts generally do not have the cooling-off period commonly associated with many consumer contracts. 

How To Reduce Business Electricity Costs?

Reducing electricity expenditure requires a combination of buying energy effectively and reducing unnecessary consumption.

Compare Suppliers And Tariffs

Businesses approaching the end of an electricity contract should compare available tariffs rather than automatically accepting a renewal.

Check the complete cost rather than focusing only on the unit rate.

Compare:

• Unit Rate
• Standing Charge
• Contract Duration
• Payment Terms
• Exit Conditions
• Broker Commission
• Renewal Terms

Businesses using brokers should also understand how the broker is paid. Many receive commission from electricity suppliers, which may ultimately be incorporated into the contract price. 

Improve Energy Efficiency

Reducing wasted electricity can lower costs regardless of which supplier a company uses.

An energy audit can identify equipment, processes or areas of a building that consume unusually high amounts of electricity.

Your existing operational measures, including LED lighting, insulation, efficient equipment and heating controls, remain useful ways to reduce unnecessary consumption. Pasted markdown Pasted markdown

Businesses can consider:

• Replacing Inefficient Lighting With LEDs
• Switching Equipment Off When Not Required
• Maintaining Heating And Cooling Equipment
• Improving Insulation
• Choosing Efficient Appliances And Machinery
• Reviewing Refrigeration Settings
• Training Staff To Reduce Unnecessary Consumption

The biggest opportunities will vary between industries. A restaurant may benefit heavily from improving refrigeration and cooking equipment, while an office could achieve greater savings through lighting, heating and IT management.

Use Smart Meters And Monitor Usage

Businesses cannot effectively manage electricity consumption without understanding when and where electricity is being used.

Smart meters and energy-monitoring systems can make consumption patterns easier to identify.

Regular monitoring can help businesses spot:

• Unexpected Overnight Consumption
• Equipment Left Running
• Unusual Usage Spikes
• Changes In Seasonal Demand
• Potential Meter Or Billing Problems

Accurate meter data can also reduce reliance on estimated bills and make it easier to compare electricity consumption over time.

What If Your Business Cannot Afford Its Electricity Bill?

Businesses struggling with electricity bills should contact their supplier as early as possible rather than allowing arrears to accumulate.

Ofgem says suppliers may be able to discuss arrangements including:

• Reviewing Existing Payment Plans
• Reducing Or Temporarily Pausing Payments
• Providing More Time To Pay
• Considering Affordable Repayment Arrangements
• Providing Access To Hardship Funds Where Available

The options offered will depend on the supplier and the individual business’s circumstances.

Small businesses and microbusinesses may also have additional protections and routes to support.

Ofgem states that qualifying small businesses can access help from Citizens Advice and may use the Energy Ombudsman for unresolved supplier complaints. 

Ignoring the issue can make the financial position more difficult, particularly if a company is already facing cash-flow pressure.

Frequently Asked Questions

What Is The Average Business Electricity Rate Per kWh In The UK?

The average UK non-domestic electricity price was around 24.51p per kWh in Q2 2026 including the Climate Change Levy, although individual rates vary by contract and usage.

Are There Government Grants For Business Electricity Costs?

There is no universal grant for all businesses, but some manufacturers, energy-intensive companies and SMEs may qualify for government or local energy-efficiency support.

Do Businesses Pay VAT On Electricity?

Most business electricity is subject to VAT, although reduced or zero-rated treatment may apply in certain qualifying circumstances.

Do Businesses Pay Climate Change Levy?

Many businesses pay the Climate Change Levy on electricity use, although exemptions and reduced rates may apply to qualifying organisations and energy-intensive businesses.

Is Business Electricity Covered By The Energy Price Cap?

No. The domestic energy price cap does not apply to business electricity contracts, so commercial rates are agreed directly with suppliers.

Can Businesses Reduce Electricity Costs By Switching Supplier?

Yes. Comparing unit rates, standing charges, contract terms and broker fees can help businesses find a more competitive electricity deal.

Do I Need Business Electricity If I Work From Home?

Not always. Many home-based businesses remain on domestic energy tariffs, although this can depend on how much electricity is used for commercial activity.