Analysis suggests UK businesses could see their energy bills rocket by up to five times when new contracts are negotiated in October 2022, putting thousands of manufacturers at risk.
According to data from energy consultancy Cornwall Insight, concerns over Russian gas supply, tight electricity markets in Europe and global disruption to liquid natural gas (LNG) will see prices spike again in the autumn.
Energy prices have been surging for 15 months, with the increases for businesses proportionately higher than those experienced by households. Firms that negotiated a two-year fixed price contract in summer 2020 could now see a fivefold rise in October, while those renewing an annual contract will see bills twice what they paid this year – which was already double the year before.
Analysts fear that the latest climb in bills could tip many businesses over the edge, particularly for those whose profitability is most exposed to energy costs, such as manufacturing industries.
While these record high prices will eventually subside, Cornwall Insight has also warned that energy prices will still remain significantly above their pre-2021 average beyond this decade, meaning manufacturers need to seek out ways to reduce their energy bills in both the short- and long-term.
Robert Buckley, Head of Relationship Development at Cornwall Insight, said :
“Logic dictates that there can only be so long that so many businesses can pay so much more for their energy without knock-on consequences for themselves, their suppliers, and the wider economy, and if we at Cornwall Insight are correct there will be no return to 2020-21 wholesale prices before 2030. Despite this, in contrast to households, there has been strikingly little said about the affordability of business energy bills.
“We are simply not having the essential conversations in Great Britain on relief for, or of, structured energy savings from businesses. We must ask ourselves whether we should be following the example of countries such as Germany, who are talking about the potential for rationing energy and taking energy savings measures now.”
The cost of energy crisis also ties in with the drive to reduce carbon emissions in manufacturing. According to recent research by Siemens and Make UK, the rising cost of energy is the number one driver for manufacturers’ decarbonisation plans, with energy efficiency seen as the immediate priority by most.