Great Britain continues to face some of the highest electricity prices in Europe for businesses, according to Ofgem’s latest report. Despite some easing of costs for larger organisations, electricity prices remain significantly above the European average — with smaller businesses bearing the greatest burden.
The findings reinforce concerns previously raised across the energy sector and highlight ongoing structural challenges in the UK’s non-domestic energy market.
Why High Electricity Prices Still Matter for UK Businesses
Persistently high electricity prices continue to affect the competitiveness and financial resilience of UK businesses. For energy-intensive sectors and smaller organisations with limited buying power, electricity costs remain a significant operational pressure.
While wholesale markets have stabilised compared to recent years, structural issues within the UK energy system mean businesses are still exposed to higher electricity costs than many European counterparts — a challenge that is unlikely to disappear in the short term.
Smaller Businesses Continue to Pay the Highest Prices
Ofgem’s latest report highlights a widening gap between energy costs for larger organisations and those faced by smaller firms.
While electricity prices fell for medium and large businesses during 2024–25, small businesses experienced price increases, pushing their costs even higher. These businesses consistently pay the most for both electricity and gas, largely due to:
- Shorter contract terms
- Reduced buying power
- Higher perceived credit risk
Although gas prices declined overall during 2025, small businesses still paid more than other non-domestic customers, reinforcing long-standing affordability challenges in this segment.
Electricity Prices in Great Britain Remain Well Above the EU Average
The report also shows that electricity prices for businesses in Great Britain remain among the highest in Europe. Medium-sized businesses are currently paying around 92% more than the EU median, placing UK firms at a clear disadvantage compared to their European counterparts.
In contrast, gas prices for businesses are broadly in line with the European median. However, because gas continues to set the wholesale electricity price in the UK, elevated gas costs still play a central role in driving higher electricity bills.
Industry analysis confirms that gas remains the marginal source of power in Great Britain, meaning fluctuations in gas markets continue to directly influence electricity pricing — even as renewable generation grows.
Why Are UK Business Electricity Costs So High?
Ofgem identifies several key structural factors behind Britain’s persistently high electricity prices:
- Gas-led price setting: Gas-fired generation still sets wholesale electricity prices, even when cheaper renewable energy is available.
- Above-average policy levies: Non-domestic customers face higher-than-average charges to fund renewables and energy efficiency schemes, particularly those that do not qualify for exemptions.
- Market risk pricing: Suppliers factor higher perceived credit risk into contracts, especially for smaller businesses.
Together, these factors mean that electricity prices in Great Britain remain elevated compared to most European markets.
Affordability Pressures and Rising Energy Debt
Affordability remains a concern for parts of the business sector, particularly sole traders and microbusinesses.
Ofgem’s non-domestic research indicates that around 70% of businesses are currently managing energy bills without difficulty, but smaller organisations are far more likely to struggle. This is reflected in rising energy debt across the market, which reached £4.48bn in Q3 2025, with 3.6 million customers now in arrears.
These figures underline the uneven impact of energy costs and the growing pressure on smaller firms already navigating higher operating expenses.
A Competitive Market, But Concentration Persists
From a market resilience perspective, non-domestic supplier profits have remained broadly stable, unlike declining margins in the domestic sector. The business energy market remains competitive, with 94 active suppliers, though market share continues to be heavily concentrated among the largest providers.
This concentration can limit choice and flexibility for smaller businesses, particularly those seeking tailored contract terms or innovative pricing structures.
Improvements in Service Quality — But a Gap Remains
There has been some progress in customer service for business energy users. Satisfaction among non-domestic customers rose to 68% in 2025, up from 62% the previous year, while complaints fell to 18%. More than half of businesses now report that it is easy to contact their supplier.
However, this still trails behind the domestic market, where overall satisfaction stands at 82%. While improvements are welcome, the non-domestic sector continues to lag behind household energy services.
Progress Toward a Lower-Cost Energy Transition
Progress toward a more flexible and lower-cost energy system continues, with 64% of business meters now smart or advanced. However, rollout has slowed, and a proportion of meters are not yet operating in smart mode.
Ofgem expects the continued rollout of Market-wide Half-Hourly Settlement (MHHS) to support the expansion of time-of-use tariffs from 2026. While this could unlock cost-saving opportunities for businesses able to shift consumption, early indications suggest most new tariff innovation is currently focused on the domestic sector rather than non-domestic users.
What This Means for UK Businesses
The latest findings confirm that electricity prices in Great Britain remain structurally higher than much of Europe, with smaller businesses continuing to face the greatest challenges.
For many organisations, actively reviewing energy procurement strategies, contract structures, and usage patterns is becoming increasingly important. With ongoing market volatility and policy-driven costs unlikely to disappear in the short term, expert guidance can play a key role in identifying savings and managing long-term risk.
