October will be the crisis point as fixed price deals come to an end.
Businesses across the UK are preparing for record energy costs to hit this winter. Many deals are due to be renewed next month, ahead of a crux point in October when thousands of companies of all sizes will have to switch to new contracts.
UK households are sheltered from sudden swings in the wholesale cost of energy by a price cap, although that is also going to be rising sharply. Unfortunately there is no such shield for companies.
Businesses often lock in for multiple year contracts, many of which come to an end in September. There is no compulsion on energy suppliers to offer new contracts, and some businesses are under pressure to find alternatives. Meaning that they may soon be dependent on short-term deals or the daily price, which is already around five times higher than this time last year.
Gas prices in Europe jumped up by as much as 10% to over €250 a megawatt hour recently, one of the highest prices on record and more than 10 times the average of the previous ten years.
Britain does not import much gas directly from Russia, approximately 5%, but competes with other buyers on the international market and traditionally relies on pipeline imports from continental Europe during the winter to meet demand, particularly during cold snaps.
Fears are that the UK could be hit harder, with its response to the energy crisis delayed in making a decision until a new prime minister takes power.
So with prices spiking again – at more than ten times the prices being paid a year ago, and twice the prices last month – next winter’s chill is already being felt in energy markets, and by many businesses planning a budget.