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Reasons Why Small Businesses in the UK Must Get the Cheapest Electricity Prices
As costs for energy suppliers rise, small businesses are faced with a variety of difficult choices. Although business energy is generally cheaper than domestic energy, it is still costly to buy electricity from a generator powered by gas. Many small businesses may have to close due to rising prices for energy. In the end, a price freeze could help businesses keep costs as low as they can.

Business energy is cheaper than electricity for homes.

Small-scale companies in the UK must ensure that they pay the least expensive price when searching for an electricity supplier. This can be a challenge because business energy can be more expensive than domestic. You'll need to evaluate the prices of both domestic and business energy, and then figure out how much each will cost. Also, take into consideration VAT and CCL.

Currently, business electricity prices in the UK are extremely variable. Businesses are required to pay VAT of 20% to purchase business electricity. However, there are exceptions for businesses that are located in the home. In this case the business must use at least 60 percent of its electricity for domestic usage.

Gas-powered electricity is used to determine the price for all electricity.

The cost of electricity in the UK is determined by the cost of electricity generated by gas. This is the most expensive source. compare business electricity of electricity comes using renewable sources that are more affordable. Researchers from UCL and Aldersgate Group conducted research that resulted in a range of recommendations to decarbonise and reform the electricity market. These recommendations aim to reduce the cost of electricity and assist in electrifying the UK economy. These studies will be published in two major reports, in May 2023 as well as November 2023.

The price of gas is also increasing, and the UK imports approximately 50% of its gas from overseas. Around a third of the UK's electricity production is produced by gas power. As gas prices rise, so do electricity prices. However, a price cap set by Ofgem and enforced by the energy regulator can help safeguard consumers. The cap shields customers from the high prices of the market by limiting default tariffs.

The high prices for energy are due to the dependence on natural gas

The energy market is very volatile and this has led to the demise of 30 UK energy companies as of 2021. When energy companies fail, their customers are reallocated to other suppliers making prices rise even more. This has led to an increase in the standing charge which is the cost of electricity for households. The standing charge for a typical household using PS1,277 increased by 54% on April 1st.


The Government has committed to addressing the energy crisis, and has attributed the current situation to the Russian invasion of Ukraine. The government is planning to raise the price of energy on 1 October, which will result in an increase of over 80 percent for households as well as small businesses in the average. While the price hike is causing great debate across the political spectrum and across the social spectrum, there is a consensus that more urgent action must be taken.

Government pressure to reduce the VAT on energy

The Government is now able to consider cutting the VAT that is imposed on household energy bills. Since 1993, household energy bills were subject to this tax. The top amount on a household's bill is the cost of energy. People with low incomes often spend three times the amount of those with higher incomes. Energy companies will be able transfer these savings onto their customers by lowering VAT on energy prices. A typical household could save PS60 annually by five percent decrease in energy costs. This is an attractive saving for households on a tight budget.

Businesses are particularly susceptible to rising costs for energy. The Federation of Small Businesses warned the Chancellor and the Government that rising energy prices are out of hand. According to reports, almost half of small companies are shutting down on certain days to reduce their energy bills. Small business owners have also written to the Prime Minister and Chancellor as well as the two Conservative party candidates for leadership to ask them to take action. They have pleaded for more powers to Ofgem and also to cut VAT on energy prices. They also want the Government to establish an emergency grant similar to the Covid scheme. They have also called for a review of the Shortage Occupation List.

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