Business power payments set to rise to half a MILLION kilos a 12 months

Energy bills for large retail and leisure units are set to rise to £550,000 a year by 2026, according to new forecasts.

Data from Cornwall Insight reveals that small industrial businesses will pay this huge annual sum for electricity by April 2026, equivalent to £238 per MWh.

The forecast, which aligns with the April to March contract renewal period, reveals that the typical industrial energy costs have fallen from the highs of nearly £1million in 2022/23.

But they remain much higher than the historic average, as the energy crisis and Russia’s invasion of Ukraine continues to effect wholesale prices.

It marks a 57 per cent increase from the pre-energy crisis level of around £350,000, or £151 per MWh, and a small increase from current bills which are currently around £540,000 a year.

Exactly how much a business will pay depends on their energy supplier and tariff, where in the country the business trades, and their overall energy usage.

Cornwall Insight’s forecasts are based on a typical annual usage of 2.33GWh.

The energy consultancy also warned that an increase in new carbon levies, as well as some new cost elements, are behind some of the price hikes.

The forecast comes after Cornwall Isight said smaller businesses are paying £5,000 more for their annual energy bill than they were at the start of the energy crisis.

The forecasts show annual electricity bills for small businesses will be an average of £13,264 by April 2025; 70 per cent higher than the £7,811 paid in 2020/21.

Unlike household energy bills, businesses do not benefit from a price cap to protect them from rising bills.

It means businesses – large and small – are more exposed to the full cost of the wholesale market, denting profitability and causing some to close for good.

Recent research by accountancy firm Price Bailey showed one in 10 pubs is at imminent risk of closure and unlikely to access funding without personal guarantees from directors.

Pubs in particular have been squeezed by higher energy costs, as well as a hike in the price of labour and food and drink.

Dr Craig Lowrey, principal consultant at Cornwall Insight said: ‘Many businesses, especially in the retail arena, are navigating an increasingly challenging environment, with some struggling to survive month to month.

‘Our forecasts showing energy costs are going to rise in 2026, only add to the pressures faced by businesses. 

‘The impact could be far-reaching, from job losses and disrupted supply chains to a decline in consumer spending -consequences that can ripple through the broader economy.’

The Government has doubled down on its commitment to generating renewable energy which should filter through to lower bills. 

However, the investment in new projects is likely to take several years before customers start to feel the benefits.

Lowrey adds: ‘We hope the renewed focus on delivering sustainable domestic production can bring some stability to the energy market and lower bills in the long run. 

‘However, as we await these potential cost reductions, it’s essential that policymakers and industry leaders work together to find solutions that can help alleviate the burden on businesses, many of whom cannot afford to wait years for relief.’

Have high energy bill hit your business? Get in touch: editor@thisismoney.co.uk