Many small businesses and small industrial consumers are facing higher energy and water bills in the next few years, rising to £200,000 over and above what they were paying before the Covid-19 pandemic and the cost of living crisis.
According to the latest data report from Cornwall Insight’s Business Energy Cost Forecast, which monitors the future energy market transmission and production costs, some could even end up paying even more.
They predict that small industrial businesses could be paying £238 per MWh for electricity by the contract year of April 2026 to March 2027. This would be over £550,000 annually and would be a 57% increase compared to pre-energy crisis levels of just over £350,000 or £151 per MWh.
Current bills are around £232 per MWh or £540,000 per year.
The forecast notes that while energy costs have fallen from their peak in 2022/23 when they reached nearly £1 million a year, the residual effects of the energy crisis and Russia’s invasion of Ukraine continue to influence the wholesale energy market.
This, alongside other changes including network charging reforms – has kept prices higher than historic averages. Additional charges coming in over the next couple of years including rises in newer carbon levies and the anticipated introduction of new cost elements will see prices increase from April 2026 across all sectors including SMEs and industrial users.
Individual households have an element of protection from rises due to the Default Tariff Cap (better known as the price cap) but businesses have no equivalent and are fully exposed to the full costs of the electricity market.
While the new Labour government is increasing and renewing focus on domestic renewable generation capacity to help reduce bills, due to the lead time associated with investing in new projects and technologies, it may take several years before consumers start to feel the benefits of this shift in emphasis.
Dr Craig Lowrey, Principal Consultant of Cornwall Insight, said: “While the electricity bills of businesses have remained above historic averages for many years, political conversation under recent governments has been dominated by household energy bills with businesses largely left out of the discussion – it’s the energy elephant in the room.
“Many businesses, especially in retail, are struggling to survive month to month. Energy costs rising in 2026 only adds to the pressure faced by businesses. The impact could be far-reaching from job losses and disrupted supply chains to a decline in consumer spending, consequences that can ripple through the broader economy.
The latest forecast covering 2025/26 estimates that the price per unit (£/MWh) would be £239.338 or £3.55 per day. Using an average of 50 MWh per year would give a small business an annual electricity bill of £13,264.
The other potential landmine waiting for small businesses is a near 30% increase in water bills by 2030.
Water industry regulator Ofwat anticipates average wholesale water charges for non-household customers including SMEs and charities to rise by 27% over the next five years.
Replying to the Federation of Small Business (FSB), Ofwat reiterated that water companies would be allowed to raise bills to enable a trebling of investment to ensure future water supplies and safeguard the environment.
Tina McKenzie, policy chair at the FSB, said: “Historic errors in management, decision-making and performance targets by water companies are now being shunted on to small business and domestic household bills, at a time when the costs of doing business are already high.
“While investment and reform are critical to creating a good water and wastewater system, there needs to be a better balance struck between how the necessary funds are raised, so unavoidable bills like water are affordable and the system works as it should.”
Many directors and business owners know that next week’s Budget statement will be consequential for them and their companies – but nobody knows how consequential yet.
Changes will be announced that will affect every business in the UK and while some might be positive, there will also be some negative impacts coming for some too.
Either way, one of the best ways of protecting yourself and your company is to get in touch with us preferably before the Chancellor gets to her feet.
No matter whether you’re looking to strengthen your business to overcome some tough financial conditions or if you think it might be time to call it a day while the going is good, or even not so good, we can help you.
Arrange your free initial chat and find out what else we can do for you before these bills come due.