Commercial Energy Prices in the UK – June 2025 Overview
UK businesses continue to face persistently high energy prices in 2025, with significant impacts on operational costs, competitiveness, and future planning. From wholesale volatility to policy-related levies, the current commercial energy landscape demands that businesses stay informed and proactive in managing their energy procurement.
Current Business Energy Prices (as of June 2025)
Electricity prices for non-domestic users now average around 26 pence per kWh, including the Climate Change Levy (CCL). Medium-to-large firms typically pay between 25–29 p/kWh, depending on consumption volume (source).
Gas prices vary more significantly based on business size. Large energy users pay around 4 p/kWh, while microbusinesses are seeing rates closer to 7–9 p/kWh (source).
On the wholesale market, energy contract prices remain volatile. As of March 2025:
- Electricity contracts averaged £84/MWh, up 5.9%
- Gas contracts averaged £99/MWh, up 6.6%
Why Prices Remain High
1. Gas-Linked Electricity Pricing and Global Market Volatility
Approximately one-third of the UK's electricity generation still relies on gas. This means electricity prices are closely tied to the global gas market. Disruptions—such as the war in Ukraine or fluctuations in liquefied natural gas (LNG) shipments—continue to drive up costs across both fuels.
2. Environmental Levies and Green Energy Costs
UK industrial electricity costs are among the highest in the developed world, averaging £258/MWh (≈25.8 p/kWh)—substantially more than rates in countries like the US, India, or China. This is largely due to:
- Carbon pricing mechanisms
- Renewables funding (e.g. Contracts for Difference)
- The Climate Change Levy (source)
3. Limited Relief for Businesses
Despite a new industrial strategy from the government, only around 370 energy-intensive companies currently benefit from the British Industry Supercharger—a targeted energy relief scheme. This leaves the majority of UK manufacturers, particularly small and medium-sized businesses, without any direct subsidies.
Impact on UK Businesses
SMEs: Squeezed from All Sides
Small and microbusinesses face electricity costs of 26–27 p/kWh, translating to annual bills ranging from £13,000 to £64,000, depending on business type and usage. Gas rates remain at 7–9 p/kWh, adding to the burden.
For example, hospitality firms have seen average electricity bills rise from approximately £17,000/year in 2020 to over £26,000/year by 2025.
Large Energy Users: International Disadvantage
UK industrial manufacturers are now paying up to twice as much for energy as some of their European competitors. This has forced several large firms to relocate production abroad. One major UK metal manufacturer shut down domestic operations entirely due to energy costs being unsustainable relative to EU peers.
Government Budget Position
Despite business lobbying, the 2025 spending review allocated no additional support for reducing commercial energy costs, raising concerns among industry bodies and energy analysts.
Policy and Market Outlook
Planned Government Measures
The government is reportedly considering a £1 billion subsidy program using a Contracts-for-Difference-style mechanism to reduce industrial electricity costs. This would help align UK energy prices with international standards. There are also ongoing consultations around:
- Removing or reducing energy levies for certain business classes
- Offering fixed-rate guarantees for industrial users
- Expanding the eligibility for relief schemes (source)
The Role of Great British Energy
A key component of the government’s long-term strategy is the expansion of Great British Energy, a new £8.3 billion, state-backed renewables initiative. This aims to boost national clean energy capacity. However, analysts warn that unless levies are revised, businesses may not see short-term cost savings from increased renewable output.
Price Forecasts for the Remainder of 2025
Electricity prices are expected to rise 8–12%, bringing average rates to 19–20 p/kWh
Gas prices could increase 5–15%, averaging 6.1–6.7 p/kWh depending on market stability
Renewable tariffs, while more competitive than in previous years, are still projected to sit around 18–20 p/kWh
Strategic Advice for Businesses
Given the market outlook and policy uncertainties, businesses should consider the following steps:
- Negotiate fixed or capped energy contracts now, before expected mid-year price increases.
- Explore renewable tariffs, which are increasingly price-competitive and support ESG targets.
- Invest in energy efficiency measures, such as demand response systems or building management technology.
- Engage with government consultations, especially if operating in energy-intensive sectors seeking inclusion in future subsidy schemes.