‘More than one million small businesses stuck in higher-tariff fixed contracts’

More than one million small businesses may be paying energy bills significantly above market rates after becoming trapped in long-term contracts fixed when prices reached a historical peak last year, trade bodies also representing convenience stores among other businesses has claimed.

Citing it a “perilous situation”, the groups are calling on ministers to force suppliers to renegotiate unaffordable energy deals struck last summer or risk thousands of insolvencies that would hit jobs and the UK economy, The Guardian reported.

A separate survey by the FSB found that 24 per cent of small businesses were on fixed deals, and 320,000 may struggle to pay their bills. Tina McKenzie, the FSB’s policy chair, said firms should be given “a fighting chance” by being allowed to “blend and extend” their existing energy rates with rates that reflect lower market prices.

Chris Noice, a spokesman for the Association of Convenience Stores, said that thousands of its members are dealing with the short-term pain of fixed contracts that were signed in the second half of 2022, at the height of wholesale prices.

In the absence of “meaningful” government support, ministers should “help them off these huge fixed contracts as soon as possible and on to something that better reflects the current wholesale market”, he said.

Noice said government had advised retailers and other businesses to opt for fixed price contracts, because it said the energy bill relief scheme would provide more protection to those on fixed rates.

Around a quarter of the UK’s 5.5 million small businesses – over 1 million companies – may have been forced to renew their long-term energy supply contracts at the peak of the market, according to separate surveys from the British Chamber of Commerce (BCC) and the Federation of Small Businesses (FSB), including through coercion or mis-selling.

At the time many small firms struggled to find an energy deal because suppliers either refused to supply small businesses or demanded large financial deposits. Since then market prices have fallen, and on 1 April the government cut its financial support for business, but companies are still locked into long-term contracts that will force them to pay inflated prices based on last year’s peak for months or even years to come.