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Small-scale businesses must make a lot of challenging decisions as energy costs rise. Although the business energy market is generally more affordable than domestic energy, it is nevertheless expensive to purchase electricity from a generator powered by gas. With energy prices set to rise the thousands of small companies may have to close down. This means that the price freeze can help businesses keep costs as low as possible.


Business energy is more affordable than electricity for homes.

When looking for a supplier of electricity small businesses in the UK should ensure that they receive the most affordable prices. This can be a challenge because the business energy market is usually more expensive than domestic energy. It is necessary to compare the costs of both domestic and business energy, and then calculate the cost of each. You should also make sure to factor in CCL and VAT.

Currently, business electricity prices in the UK are heavily variable. Businesses have to pay VAT of 20% to purchase business electricity. However there are some exceptions for businesses that are located in the home. In this situation it is required to use at least 60 percent of its electricity to serve domestic uses.

Gas-powered electricity is used to determine the price of all electricity

The price of electricity in the UK is set by the cost of electricity powered by gas, which is the most expensive source. The majority of electricity is generated from cheaper renewable sources. Researchers from UCL and Aldersgate Group conducted research that led to a variety of suggestions to decarbonize and reform the electricity market. These recommendations are designed to lower the cost of electricity and also electrify the UK. These studies will be published in two major reports, in the months of May 2023 and November 2023.

The UK imports around 50% of its natural gas from outside. This is an indication of rising gas prices. Around a third of the electricity produced in the UK is generated by gas power. As gas prices increase, so do the prices for electricity. However, a price cap set by Ofgem and enforced by the energy regulator will help safeguard consumers. The cap safeguards consumers from price hikes by restricting default tariffs.

The high energy costs are due to overdependence on natural gas

The energy market is extremely unstable, which has led to the demise of 30 UK energy firms since 2021. If energy companies fail, their customers are transferred to other providers which push prices higher. This has resulted in an increase in the standing fee which is the price of electricity for households. On April 1 the standing cost for an average household consuming PS1,277 soared by 54%.

The government has made a promise to take action on the energy crisis, and has blamed the current crisis on the Russians’ invasion of Ukraine. The government is now planning to increase the energy price cap from 1 October. This will result in an increase of over 80 percent for households and small businesses in the average. While the increase in price is causing controversy across the political spectrum and social spectrum, there is an agreement that urgent action needs to be taken.

Government pressure to cut the energy VAT

The Government has the option of cutting the VAT on household energy bills. Since 1993, domestic energy bills were subject to this tax. The price of energy is typically the most expensive item on a household’s budget and households with low incomes spend three times the amount of the highest-earning households. In reducing VAT on energy prices, energy suppliers can transfer these savings onto customers. A typical household could save PS60 per year through five percent decrease in energy costs. This is a significant savings for families with limited budgets.

compare business electricity are especially vulnerable to rising prices for energy. The Federation of Small Businesses has issued an alert to the Government and Chancellor that energy prices are increasing beyond control. It has been reported that almost half of small businesses have ceased operations on certain days in order to save money on energy bills. Small business owners have written to the Prime Minister and Chancellor as well as the two Conservative party leadership candidates to ask them to take action. They have requested more powers for Ofgem and to cut the energy price by a percentage of VAT. They also demand that the Government create an emergency grant that is similar in design to the Covid scheme. They have also demanded a review of the Shortage Occupation List.