What Does The Average Business Spend On Business Energy?

Rising energy bills are a growing concern for businesses across the UK. From boutique shops in Brighton to bustling cafés in Cardiff and large warehouses in Wolverhampton, energy costs are cutting deeper into profit margins. With ongoing market volatility, fluctuating tariffs, and increasing operational demands, energy is no longer just a background expense; it’s a strategic priority.

Understanding what your business is likely to spend and, more importantly, how to reduce that spend, can make a significant difference to your bottom line. Whether you're reviewing bills for the first time or actively seeking savings, knowing how to find the cheapest business energy tariff in the UK is a crucial first step. This in-depth guide breaks down what the average UK business pays, the key factors that influence your rates, and practical steps you can take to take control of your energy bills.

Average Business Energy Costs in the UK 

While actual costs can vary widely depending on your business’s energy usage, physical location, and industry type, having a reliable benchmark helps put things into perspective. Based on recent Ofgem figures and current market data, here’s a general breakdown of what UK businesses typically pay for their electricity and gas each year:

These figures include standing charges and average unit rates but don’t reflect inefficiencies or out-of-contract penalties.

Breakdown of Energy Costs by Sector 

Your business type plays a major role in shaping your overall energy bill. Different sectors have vastly different operational needs, which directly influence consumption levels. Understanding your industry’s typical usage patterns can help you benchmark your own energy performance more accurately and identify areas for improvement.

Here’s a quick overview of how energy use tends to differ by sector:

• Retail stores – Generally see moderate consumption driven by lighting, heating, air conditioning, and refrigeration for perishable goods
• Hospitality (restaurants, cafés, hotels) – Tend to have high energy needs due to continuous kitchen operations, hot water demands, and extended opening hours
• Manufacturing and industrial – Typically experience very high usage, often requiring specialised machinery and benefiting from tailored energy tariffs
• Office-based businesses – Usage is usually lower to moderate, depending on factors like staff count, operating hours, and reliance on IT infrastructure

Knowing where your business stands within your sector can highlight potential overuse or inefficiencies and guide your cost-cutting strategy.

Key Factors That Influence Your Business Energy Bill 

Business Size and Usage 

The more operations your business runs, the more energy it consumes, which is the most straightforward and significant driver of energy costs. Whether it’s extended working hours, multiple locations, or energy-intensive processes, higher operational demands naturally lead to increased consumption and, in turn, larger bills. Understanding this baseline helps you identify where adjustments can lead to meaningful savings.

Tariff Type and Contract Length 

• Fixed-rate contracts protect against price increases
• Variable tariffs follow market trends, sometimes spiking
• Out-of-contract rates can be up to 80% more expensive

Location 

Regional variations across the UK can significantly impact your Distribution Use of System (DUoS) charges. These are fees related to the cost of delivering electricity from the national grid to your premises. Businesses located in certain areas, especially rural or less densely populated regions, often pay more due to higher infrastructure and maintenance costs associated with local distribution networks.

Energy Efficiency 

Outdated equipment, poor insulation, and the absence of smart energy controls can all contribute to excessive and unnecessary energy consumption. These inefficiencies often go unnoticed but can steadily drive up your bills over time. Investing in modern appliances, upgrading insulation, and installing smart meters or automated systems can significantly reduce waste and improve overall energy performance.

Average Unit Rates and Standing Charges 

Here are the typical 2025 rates:

Gas is cheaper at around 8p–12p per kWh, with standing charges between 25p–40p/day.

Understanding Out-of-Contract Rates 

If your current energy contract expires and you haven’t arranged a new deal or switched suppliers, your provider may automatically place you on a default or out-of-contract tariff. These rates are rarely competitive and can have a major impact on your monthly costs. In fact, they’re often:

• 80–100% more expensive than negotiated or fixed-rate deals
• Not protected by any form of price cap, unlike domestic energy rates
• Auto-renewed without notice, leaving you locked into unfavourable terms

Tip: Always make a note of your contract’s end date and start comparing new tariffs at least a few weeks in advance to avoid falling into this costly trap.

How to Reduce Your Business Energy Costs 

There’s no one-size-fits-all solution or magic switch when it comes to cutting energy costs, but with consistent, practical actions, businesses can make a noticeable difference over time. Small improvements across different areas of your operations can collectively lead to substantial long-term savings.

Conduct an Energy Audit 

• Identify energy-draining systems
• Use smart meters to track patterns
• Prioritise changes in heating, lighting, and machinery

Compare Tariffs 

Switching energy suppliers at the right time can reduce your costs by as much as 30%, especially if you're currently on a standard or default tariff. Instead of letting your contract auto-renew often at higher rates, use a trusted broker or online comparison tool to explore more competitive deals tailored to your business needs. To learn more about this process, read our comprehensive guide on how to switch your business energy. Taking this proactive step can result in significant savings over the course of a year.

Install Smart Meters 

Installing a smart meter allows you to avoid the guesswork of estimated billing and gives you access to real-time usage data. This not only ensures accurate invoices but also helps you spot consumption patterns, identify waste, and make informed decisions about when and how to use energy more efficiently.

Upgrade to LED Lighting 

Switching to LED lighting is one of the simplest yet most effective ways to reduce energy use. LEDs consume up to 75% less energy than traditional incandescent or halogen bulbs, while also lasting significantly longer, reducing both electricity and replacement costs over time.

Educate Your Team 

• Turn off unused appliances
• Use heating/cooling efficiently
• Set equipment to energy-saving modes

Checklist: How to Lower Your Energy Bill 

 ✅ Review your current contract
✅ Get quotes from multiple suppliers
✅ Install a smart meter
✅ Upgrade lighting and machinery
✅ Check your insulation
✅ Set clear shutdown procedures
✅ Schedule regular audits
✅ Track usage monthly
✅ Educate your staff
✅ Avoid default/out-of-contract rates

Case Study: How One Business Cut Energy Costs by 40%

A West Yorkshire packaging company was spending £7,800 annually. They:

• Switched to a two-year fixed tariff
• Replaced old compressors and heaters
• Installed motion-sensor lighting
• Reviewed weekend energy wastage

Savings: £3,120 annually, money redirected toward their product R&D.

The Impact of the Energy Price Cap on Businesses 

Unlike households, UK businesses do not benefit from the domestic energy price cap, which means they are more exposed to fluctuations in the wholesale energy market. As a result:

• Prices can spike suddenly in response to global supply issues, economic changes, or seasonal demand
• Businesses face greater financial risk during periods of volatility, with no automatic protections in place
• Locking in a long-term fixed contract can offer price certainty and help shield your business from unexpected cost surges

Understanding this distinction is key to building a more stable and predictable energy strategy.

Government Energy Support for UK Businesses 

The UK government offers various support routes:

• Energy Bills Discount Scheme (EBDS) – helps eligible businesses lower costs during high market prices
• Climate Change Levy (CCL) relief – available if your energy comes from certified renewable sources
• Enhanced Capital Allowances – tax relief on energy-efficient equipment
• Regional grants – LEPs or devolved governments in Wales, Scotland, and Northern Ireland offer energy support

Should You Work With an Energy Consultant? 

Energy brokers or consultants can help you:

• Navigate tariff options
• Access bulk pricing
• Avoid costly terms or fees
• Review your usage trends

Bonus: Many work on commission only, with no upfront fee.

Energy Forecast: Will Prices Rise or Fall? 

Market experts predict modest volatility in late 2025, but wholesale prices are expected to remain below their 2022 peak. Key drivers:

• Reduced geopolitical pressure
• Increased UK renewable supply
• Demand stabilisation across Europe

Still, fixed-rate contracts remain a smart hedge.

How to Read Your Business Energy Bill 

Understanding your bill helps identify issues early. Here's what to look for:

• Unit rate (kWh): Your usage charge
• Standing charge: Fixed daily cost for supply
• Climate Change Levy (CCL): Environmental tax
• VAT: Usually 20% for businesses
• MPAN/MPRN: Your unique supply reference numbers

Conclusion 

Energy costs might feel like a fixed, non-negotiable expense, just another line item on the balance sheet. But in reality, they offer one of the clearest opportunities for savings and operational improvement. The key lies in moving from reactive bill-paying to proactive energy management.

With access to accurate data, smart technology like meters and monitoring tools, and trusted guidance from energy consultants or comparison services, UK businesses can regain control over their energy footprint. Whether it’s switching to a better tariff, upgrading to efficient equipment, or simply becoming more aware of daily consumption habits, every step contributes to long-term savings.

In today’s competitive landscape, reducing energy costs isn’t just about saving money; it’s about staying agile, sustainable, and resilient in the face of rising costs and economic uncertainty. By taking the initiative now, you’re not just cutting overhead, you’re building a more efficient, future-ready business.

Summary Points 

• Small businesses spend roughly £2,000–£3,000/year on electricity
• Industry and location greatly affect overall energy costs
• Avoiding out-of-contract rates can save up to 80%
• Government schemes like EBDS offer helpful support
• Comparing energy deals is the most effective way to reduce bills

Frequently Asked Questions 

Q1: How much energy does the average UK business use?

A1: Small businesses generally use 15,000–30,000 kWh of electricity and 10,000–25,000 kWh of gas annually.

Q2: Can I switch suppliers at any time?

A2: Yes, as long as you're not locked into a contract. Always check your renewal window.

Q3: Why are my bills so high even when usage is low?

A3: You may be on an out-of-contract tariff or have high standing charges. Review your rate plan.

Q4: Are there business energy price caps like domestic ones?

A4: No, businesses are not protected by the Ofgem energy price cap.

Q5: Can I get help if I use green energy?

A5: Yes, schemes like CCL exemption and Enhanced Capital Allowances reward energy-efficient choices.