What recent energy debt trends tell us about the health of UK businesses

If you're falling behind on your business energy bills, it can feel overwhelming. But you’re not alone. Ofgem’s latest data shows that domestic energy debt has reached a record high of £4.48bn in June 2025, an increase of 20% from 2024 and 71% since 2023.

But what does this mean for UK businesses? This guide explains what business energy debt is, how it impacts the financial health of businesses, what suppliers can and cannot do and what you can do to protect your business before disconnection becomes a real risk. 

Five-point summary of our business energy debt guide

• UK energy debt has surged to record levels, with Ofgem reporting £4.48 billion owed in June 2025 - a 71% rise since 2023.
• Rising energy arrears are tightening cash flow and impacting the financial stability of UK SMEs, especially those in energy‑intensive industries.
• Businesses that fall behind on payments risk disconnection, though suppliers must give at least seven days’ notice.
• Proactive steps, such as contacting suppliers early, agreeing on payment plans and exploring grants, can help prevent debt escalation.
• Reducing energy use through audits, efficient equipment and renewable solutions can lower long‑term costs and improve sustainability.

What is energy debt?

All businesses in the UK should have a business energy contract for the energy they use. Companies typically pay monthly, and the amount you're billed depends on the energy you use and the standing charge, as well as taxes and levies.

Business energy debt is money your company owes for gas or electricity supplied under a contract that has not been paid in line with the agreed terms. It’s important to understand that anyone can fall into and require help with energy debt. Although debt can be frightening, there is support available for you.

Recent energy debt trends

Energy debt has risen significantly in recent years as increases in domestic gas and electricity prices have placed many households under financial strain. This has contributed to the wider post-Covid cost of living crisis. As energy bills climb alongside other essential living costs, more people struggle to keep up with payments. 

According to Ofgem’s debt and arrears indicators, the average level of debt for customers with a debt repayment plan in place rose by 5% for electricity customers (to £785) and by 3% for gas customers (to £651) in Q3 2025 compared to Q2 2025. 

The last three years have also seen substantial increases in average arrears, reaching £1,749 for electricity and £1,494 for gas in Q3 2025 (up by 12% for electricity, and 13% for gas compared to Q3 2024).

In October 2025, Ofgem announced its plans for an energy debt write-off that could cut £500m from the stack of customer debt, as part of wider efforts to stabilise the market. The energy relief scheme would let companies recover a portion of the losses through charges spread across customer bills over several years to protect the most vulnerable.

How can energy debt impact the financial health of businesses?

While much of the available data centres on household energy debt, the wider economic pressures have clear consequences for businesses. Managing cash flow and debt is already challenging for many firms, and ongoing inflation has forced consumers to cut back on both non-essential and everyday spending. As customer demand tightens, businesses may see revenues fall while their operating costs remain high.

With energy prices showing little sign of decline, energy debt can quickly impact already thin margins, particularly during colder months when usage increases. For energy-intensive organisations, such as manufacturers and large warehouses, the impact is even more pronounced. Rising arrears can strain cash flow, limit investment opportunities, and in severe cases, threaten day-to-day operations and long-term viability.

Why should SMEs be concerned?

Small and medium-sized enterprises (SMEs) are often hit hardest when energy prices rise. During the cost-of-living crisis, many microbusinesses in particular have struggled to keep up with higher operating costs, leading to growing levels of energy debt.

Microbusiness customers do not have the same protections as domestic consumers in certain areas, including disconnection and debt support. For example, a report from Citizens’ Advice highlights that while the Supply Licence Condition 0A (SLC0A) requires suppliers to treat business customers fairly, debt and disconnection practices are not specifically covered. This leaves some SMEs more exposed if they fall behind on payments.

Inconsistent billing can also cause debt to rack up. Under current rules, suppliers are only required to provide microbusiness customers with a statement of account twice a year. As a result, debts can accumulate over several months without businesses having full visibility, making it harder to manage cash flow and avoid unexpected liabilities.

This is a situation that should be helped by the Market-Wide Half-Hourly Settlement (MHHS) rollout.

What can happen if your business can’t pay its energy bills?

If your business can’t pay its energy bills, it can be disconnected by the supplier. Your contract will often state that the supplier only has to give seven days’ notice before they disconnect you. However, before it gets to this stage, you will usually receive several letters or phone calls from them. 

The Citizens Advice Extra Help Unit may be able to offer support if you are threatened with disconnection. You can contact them via the Citizens Advice consumer helpline by asking to be transferred to the Extra Help Unit.

What can you do if you need help with energy debt?

If you can’t afford to pay your business energy bills and need help with energy debt, it is important to act early and not avoid the problem. Here are the steps you can take to help get your business back on track:

Contact your supplier

The first thing you should do is let your supplier know you are struggling. Being open and honest shows that you’re being proactive and taking your payment issues seriously. 

Agree on a business energy payment plan

Suppliers can work with businesses to set up tailored payment plans to ease the immediate financial pressure of the debt. These typically involve spreading out arrears over a longer period through manageable installments.

It’s important to note that your supplier does not have to offer you a pre-payment meter before disconnecting your fuel.

Check business finance schemes and grants

Many energy suppliers offer schemes or grants to help you improve your business energy efficiency, which can reduce costs. Alternatively, you can ask your local council about small business support funding, including sustainable growth grants.

Get business debt advice

You can find advice on managing business debt and budgeting through the Business Debtline from the Money Advice Trust.

Other tips

For in-depth guidance on ways to maximise your business energy savings, see our energy saving tips for small businesses guide.

How can businesses keep energy prices down?

Whether your business operates with a few staff members or employs a large workforce across several sites, thinking about how and when you use gas and electricity is key. Here are some of the ways you can help keep your business energy prices down:

Conduct an energy audit

One of the key ways businesses can keep energy prices down is to make sure they know the terms of their current contract. Conducting a business energy audit to see how energy is being used may help you to identify areas where you can save energy. It is also a good idea to check your meter regularly and to review your energy bills. This will help you to understand whether it may be possible to save money by switching to another tariff or another supplier.

Upgrade equipment

Heating, ventilation, and cooling (HVAC) systems account for the largest share of energy use in most commercial and industrial buildings. Upgrading your business’s HVAC system can significantly reduce energy costs while improving indoor comfort and air quality. It can also extend the lifespan of your equipment, lower your carbon footprint and emissions and help ensure compliance with current and upcoming energy efficiency standards and regulations.

Implement energy-saving measures

Businesses can cut energy costs by introducing practical operational changes and smarter technology. Simple actions such as upgrading to energy-efficient LED lighting, installing a smart thermostat, maintaining HVAC systems and switching off machinery when not in use can lower consumption without disrupting operational productivity.

Incorporate renewable energy

Incorporating renewable energy sources can help to cut the cost of your energy bills even further. For many UK businesses, rooftop solar panels or air‑source heat pumps are often the most practical starting points. Larger rural sites may also consider small‑scale wind, biomass or anaerobic digestion. Beyond simply saving money, renewable energy sources can help small businesses become energy independent, make your business more marketable and cut your carbon footprint.

Review energy contracts

When your energy contract ends, you may move onto deemed or out-of-contract rates, which are often higher than fixed-term contract prices. Some contracts may also automatically renew if notice is not given. If you do not renegotiate with your supplier when your contract ends, you could automatically be tied into another costly contract. 

At Bionic, we manage a high volume of business energy renewals on behalf of UK customers. When it’s time to renew your next business energy contract, we compare prices for you to help reduce the risk of moving onto higher out-of-contract rates. 

How Bionic can help

At Bionic, we help SMEs compare business energy quotes, secure competitive contracts and plan procurement strategically through our panel of suppliers. To switch to a better deal, just give us your postcode and our tech-enabled experts will use smart data to find a business energy contract that suits the unique needs of your business. Join thousands of UK businesses already saving through Bionic’s business energy suppliers comparison service. 

Get in touch to discuss your needs or get more information by starting a quote online today.

Business energy debt FAQs

Still unsure about how business energy debt? Check out the answers to some of the most frequently asked questions.

What is business energy debt?

Business energy debt is the unpaid balance a UK business owes for electricity or gas supplied under its current energy contract.

Why is UK business energy debt increasing?

Rising wholesale prices, higher operating costs and slower consumer spending have pushed more UK firms into arrears.

How does energy debt affect small businesses in the UK?

Energy debt strains cash flow, limits investment and in severe cases can threaten operations - especially for SMEs with tight margins.

Can my UK business be disconnected for unpaid energy bills?

Yes, but your supplier must give at least seven days’ written notice before disconnecting your supply.

What should I do if my business can’t pay its energy bills?

If you are struggling to pay your energy bills, contact your energy supplier immediately to discuss a repayment plan and check for grants or business support schemes.

Can I switch energy suppliers while in debt?

You may be able to switch energy suppliers while in debt, but most suppliers require clearing outstanding debt before completing a switch; check your contract for details.

How can UK businesses cut energy costs?

Businesses can reduce energy costs by carrying out an energy audit, installing efficient equipment like LED lighting and reviewing energy contracts regularly to avoid high out‑of‑contract rates.

Where can my business get help with energy debt?

Contact the Business Debtline or Citizens Advice Extra Help Unit for free, confidential business debt advice.