Business energy costs have risen significantly over recent months, creating another period of uncertainty for organisations trying to manage their overheads.
According to Cornwall Insight, business energy costs increased by around 25% between February and August 2026. So, what has been pushing prices upwards?
Wholesale Energy Prices Have Increased
One of the biggest factors increasing business energy costs is the wholesale market.
Wholesale energy is the gas and electricity suppliers purchase before selling it to businesses and households. Wholesale costs can typically account for around 40% of a business electricity bill and 60% of a gas bill, although the exact proportion varies.
Recent geopolitical uncertainty in the Middle East has contributed to higher wholesale gas prices. Great Britain imports a proportion of the gas it uses, meaning international supply and demand can influence the prices businesses ultimately face.
Gas and electricity prices are closely linked in the UK energy market. Although a growing proportion of Britain’s electricity comes from renewable sources, gas-fired power stations are still regularly needed to meet demand. Because gas generation can help set the wholesale electricity price, increases in gas prices can also push electricity prices higher.
European Gas Storage Is Adding Pressure
Gas storage has also been an important factor. Higher prices and market conditions have made it more difficult for European gas storage operators to replenish stocks ahead of winter. Lower storage levels can make markets more sensitive to potential supply disruption or periods of higher demand.
This doesn’t necessarily mean prices will continue rising at the same rate. Energy markets can move quickly in either direction as supply, demand, weather and geopolitical conditions change.
However, it does mean uncertainty is likely to remain an important consideration for businesses approaching a contract renewal.
Weather and Global Demand Have Played a Part
Energy demand has also contributed to recent market movements.
Heatwaves across parts of Europe during summer increased electricity demand for air conditioning and cooling. At the same time, strong demand for liquefied natural gas (LNG) from Asia and extended outages affecting Norwegian offshore production have added further pressure to European gas markets.
As we move towards winter, weather will continue to be closely watched. Colder conditions generally increase gas demand for heating, while electricity prices can also be affected by factors such as wind generation and overall system demand.
It’s Not Just Wholesale Energy
Wholesale prices aren’t the only part of a business energy bill that is changing. Businesses also pay a range of non-commodity costs covering areas such as the electricity and gas networks, system balancing and environmental programmes.
Network costs have been increasing as investment is made in Britain’s energy infrastructure, while the cost of balancing supply and demand across the electricity system also forms part of the overall amount businesses pay.
This means a fall in wholesale prices doesn’t necessarily translate into an equivalent reduction in the overall cost of energy.
What Does This Mean for Businesses?
The effect of the recent market increase won’t be the same for every business.
Organisations that secured their energy in advance may be partly protected from short-term wholesale movements, while those approaching a renewal could be more exposed to current market conditions. Procurement strategies such as fixed and flexible contracts can also respond differently to changing wholesale prices.
For businesses, the key is therefore not to react to one headline or short-term market movement, but to understand their own position.
Reviewing contract end dates, consumption, billing, agreed capacity and procurement options can provide a clearer picture of where costs are coming from and whether there are opportunities to manage them more effectively.
At BP Consulting, we can help you understand what current energy market conditions mean for your organisation and identify potential opportunities to reduce or better manage your costs.
From reviewing your procurement strategy and energy contracts to bill validation, consumption analysis and wider energy management, our team can provide practical advice based on your individual circumstances.
Get in touch with our energy experts to review your current position and find out where potential savings opportunities could be available.
