In 2022, the war in Ukraine sent energy prices skyrocketing across Europe. The continent’s heavy reliance on fuel imports from Russia left nearly every country affected. Four years on, Britain continues to face some of the highest live electricity prices in Europe. Small and medium-sized businesses (SMEs) now pay around 92% more than the EU median. This leaves UK firms at a clear disadvantage.

Energy prices have become a major factor in the decline of Britain’s high streets. Areas once thriving with independent businesses are now becoming ghost towns. As energy bills rise, smaller firms are pushed out of the market. They are replaced by larger chains and corporations that can better absorb higher margins. Meanwhile, across much of Europe, local businesses continue to thrive. High streets remain filled with businesses rooted in their communities, such as delis, butchers, bakeries, and restaurants. So, why are UK business energy prices higher than that of Europe?

Has anything changed since May?

Not much has changed for most small firms. Britain had record wind output of 6.62 TWh in September, yet day-ahead power still averaged £135.39/MWh, roughly double a year earlier, because gas plants set the price at key times (Bloomberg reported this on 7 October). October averaged £146.35/MWh, so the link between gas and electricity described below is as strong as ever.

The Budget on 28 October did offer help, but it's aimed at heavy industry. The British Industrial Competitiveness Scheme will exempt eligible manufacturers, around 10,000 firms, from some policy costs from April 2027, and eligible energy-intensive businesses can get up to 90% of their network charges back from April 2026. There's still no general support scheme for SMEs. For a small business the main levers remain timing and contract choice, so check current business electricity prices well before your renewal.

Line chart of UK wholesale power by month since 2021, peaking at 37.4p a kWh in August 2022 and at 14.6p in October 2026

The Slow Shift to Renewable Energy

The UK relies heavily on global markets. Investment in renewable energy has also been slow. Other European countries have greater access to nuclear power, hydroelectric power, or cheap renewables. The UK, by contrast, relies heavily on natural gas to generate electricity. This means prices stay closely tied to volatile global gas markets. Norway, for example, generates around 90% of its domestic electricity from renewable hydropower. In Britain, renewables account for just 44.4% of electricity generation. Renewables do help stabilise prices over time. However, the UK's energy mix still includes a large share of gas-fired power. This leaves costs more exposed to swings in gas prices.

Modernising Britain's ageing grid and energy infrastructure comes at a price. The UK is expanding interconnectors, offshore networks, and more flexible systems. However, the cost of these upgrades is passed on through energy bills. This means households and businesses end up paying more, even if their usage has not changed. European countries are in a different position. Many benefit from newer systems, or fund energy transitions through general taxation. This helps keep electricity prices lower for consumers.

Why SMEs Bear the Weight of UK Business Energy Prices

Smaller firms often pay more per unit than larger companies. The gap between large industrial users and smaller firms continues to widen. Ofgem and industry data showed that electricity prices fell for medium and large businesses in 2024-2025. Many smaller firms, however, saw their prices increase, leaving them paying the highest rates in the market.

The reason for this is that small businesses have less buying power. Large organisations can negotiate bespoke energy contracts on more favourable terms. They also receive partial exemptions from some policy costs and levies. While many smaller firms rely on standard tariffs and shorter contracts, leaving them more exposed to market volatility. Alongside this, suppliers often price at a higher risk for SMEs, which results in higher unit rates. Wolters Kluwer Tax & Accounting polled more than 1,000 SMEs across Europe for a recent report. It found that 56% of UK SMEs listed challenging economic conditions and rising costs as their biggest challenge. The European average was just 40%. It is no surprise that many local businesses have started to disappear. They struggle to plan budgets, maintain profit margins, and invest in future growth.

What Can Small Businesses Do?

Compared to Europe, British businesses reported being more ready for regulatory changes and tough conditions than their continental counterparts. In fact, 44% stated that they were fully prepared. Compared to 31% in the Netherlands, 32% in Germany, and 16% in Sweden. British businesses stand out for their resilience, readiness, and trust in advisors to navigate complexity. They know they have little choice in the face of adversity. So they keep calm and carry on.

The system may feel stacked against small businesses. However, there are practical steps businesses can take to stay in control of their energy costs. The key is to act early and make informed decisions. Too many businesses let contracts roll over into expensive out-of-contract rates. Others renew without exploring better options. By reviewing energy deals months in advance, businesses can secure far more competitive rates. They can also avoid being exposed to sudden price spikes. Choosing the right contract type, whether fixed, flexible, or pass-through, can make all the difference. That is why expert support is important. With the right guidance, businesses can time the market. They can compare the best deals and build a strategy that works for them.

How Can Purely Help Your Business?

Would you like a free quote? Fill in the box below. You can also compare the most competitive business energy rates. For more information, contact us on 0161 521 3400 or email us at info@purelyenergy.co.uk