Energy price cap increase creates ‘perfect storm’ for businesses – London Business News | Londonlovesbusiness.com

As Ofgem announces the energy price cap will increase to £1,738 from January 2025, an SME expert has warned that businesses will feel the knock-on effects of dwindling consumer spending power.

With SMEs preparing for the hike in employer National Insurance contributions set to come into force in April 2025, the last thing they needed was another financial hit.

However, before those increases take effect, which will raise contributions by 1.2 percentage points to 15%, businesses must contend with yet another rise in energy costs.

It has today been announced that the price cap for household energy will rise to £1,738 from January. Of course, this increase does not directly impact UK business, and there is no price cap on non-domestic energy. However, wholesale price increases are the main factor in rising bills for businesses, so we fully expect costs to go up across the board.

This will only squeeze margins ever tighter and hit industries like hospitality – who can ill afford it – harder than most. This situation could create a perfect storm of financial pressures for UK businesses, especially SMEs, which are already grappling with pandemic recovery challenges, supply chain issues, and inflationary pressures. Rising energy costs increase operational expenses and impact consumer spending power, creating a double-edged sword for businesses.

We urge businesses to take proactive steps to mitigate these rising costs, whether by reviewing energy contracts, exploring fixed-rate options, or implementing energy-saving measures. For instance, we know 70% of firms experience difficulty comparing energy tariffs, while 43% have never switched suppliers – so this is a good place to start. Now more than ever, strategic financial planning and cost management are crucial to weathering this storm.