The UK Vs Europe: Why are UK small businesses paying so much for energy bills?

Running a small business in the UK is tough enough without the added pressure of high energy bills. Yet, compared with many European neighbours, UK businesses still pay significantly more for their gas and electricity bills than similar firms abroad.

Let's take a closer look at how UK energy prices compare with those across Europe, explore the main reasons behind the price gap, and explain what this means for SMEs across the country. We’ll also outline some practical steps you can take to claw back a bit of control over your business energy costs.

Five‑point summary on UK vs. Europe energy prices

1. UK small and medium‑sized businesses pay some of the highest electricity prices in Europe, with medium users often paying around twice the EU median.
2. Key reasons include the UK’s gas‑dependent power system, high network and policy costs loaded onto electricity bills, and exemptions that favour heavy industry over SMEs.
3. Small businesses typically pay more than larger UK users because they have less buying power, shorter fixed terms, higher perceived credit risk and fewer exemptions from levies.
4. While wholesale prices have fallen from the 2022–23 peaks, UK electricity prices remain well above 2019 levels and higher than most EU markets, so many SMEs still feel under pressure.
5. SMEs can’t fix market design, but they can reduce usage, improve efficiency, shop around at renewal, consider on‑site renewables and get support from brokers like Bionic to find sharper deals

Why are UK business energy prices higher than in Europe?

There's no single reason why UK energy costs more than in other countries – it’s down to a mix of market design, policy choices, infrastructure and geography.

While the extreme wholesale price spikes of 2022 have eased, recent analysis shows that UK industrial and business electricity prices are still among the highest in Europe, especially for small and medium‑sized users. Let’s break down some of the main drivers.

Reliance on gas and global markets

Unlike some European countries with greater access to nuclear or hydroelectric power or cheap renewable resources, the UK relies heavily on imported natural gas to generate electricity, which means prices are closely tied to volatile global markets.

When wholesale gas prices spike – for example, because of conflict, supply issues or higher global demand – UK businesses often feel the impact faster and more sharply than those in countries with more diverse or less gas‑heavy energy mixes. Even when cheaper renewables are available, Britain’s marginal pricing system means it’s often the last, most expensive gas‑fired plant that sets the price for all electricity sold.

By contrast, countries with more nuclear or hydro – like France, Sweden or Norway – can sometimes shield businesses more from gas‑led price shocks, even though they’re not completely immune.

Slower renewable investment

While the UK has made progress on wind and solar, investment in renewable infrastructure hasn’t kept pace with some European neighbours.

Countries such as Denmark and Germany have had long‑running renewable energy support schemes and large volumes of onshore wind and solar connected earlier. This has helped these countries build bigger, more consistent low‑carbon generation fleets. This can stabilise prices over time, even if there are still periods of volatility. 

The UK’s fuel generation mix still includes a sizeable share of gas‑fired power, keeping prices more exposed to gas swings.

Delays to some UK projects and grid connection queues also make it harder for new renewables and flexible assets to come online quickly, which can keep system costs higher than they might otherwise be.

Infrastructure lag and network costs

The switch to sustainable energy in the UK is in motion, but a lot of the UK’s grid and energy infrastructure is ageing and needs significant investment to handle new demand, local generation and electrification. These upgrade costs are recovered through network charges on bills, which can be higher than in some European countries with more modern or lower‑cost networks. 

Although Britain is investing in interconnectors, offshore grids and network flexibility, these long‑term projects come with big price tags. At the moment, much of that cost is loaded onto electricity bills paid by homes and businesses, for instance, the RAB Nuclear Levy and increased non-commodity costs.

This adds to the price gap versus parts of mainland Europe, where network and policy costs may be lower or spread differently.

Taxes, levies and standing charges

UK energy bills include a range of extra costs – like environmental and social levies, capacity market charges and standing charges – that don’t always apply in the same way, or at the same level, across Europe.

These add‑ons can quickly bump up the total you pay, even if your usage stays the same. In Great Britain, a large share of the cost of supporting renewables and energy efficiency schemes is recovered through electricity bills, which can make business electricity more expensive than in countries that fund more of these policies through general taxation or spread them differently.

Recent UK policies, like the British Industry Supercharger scheme, have also focused on cutting levies and network charges for a small group of energy‑intensive industries, while most SMEs continue to pay full costs. That makes the gap between large industrial users and smaller firms even wider.

Why do UK SMEs pay more than larger businesses?

It’s not just that UK prices are high compared with Europe – smaller firms often pay more per unit than bigger UK companies too.

• Less buying power – Large industrials can negotiate bespoke contracts and benefit from economies of scale, while many SMEs sign standard‑rate deals.
• Shorter contract terms – Smaller businesses tend to fix for shorter periods, which means they’re exposed to volatile markets more frequently.
• Higher perceived credit risk – Suppliers often price in higher risk for SMEs, which can result in higher unit rates or a smaller choice of suppliers.
• Fewer exemptions – Energy‑intensive industries may get partial or full exemptions from some policy costs and levies, whereas SMEs usually pay the full amount.

Ofgem and industry data show that while electricity prices fell for medium and large businesses in 2024–25, many smaller firms actually saw prices increase, leaving them paying the highest rates in the non‑domestic market.

What impact are high energy bills having on SMEs?

Higher energy bills are hitting SMEs hard. Many small business owners have seen their overheads skyrocket, making it more difficult to plan budgets, maintain profit margins, or invest in future growth.

In our SME Insights Report, nearly a third of business owners said the rising cost of energy was their biggest financial challenge of 2024. With no price cap on business energy and no other government support available, many businesses have had to rethink their spending, just to keep the lights on.

Energy-intensive sectors like retail, hospitality and manufacturing have been hit especially hard, facing the choice between absorbing costs, raising prices, or reducing staff hours.

How do UK business energy prices compare with those in Europe right now?

Comparing like‑for‑like business energy costs across Europe is tricky because of different tariffs, taxes and support schemes. But recent analysis paints a clear picture: UK business electricity prices are still near the top of the league table.

According to recent industry and government‑backed research:

• Medium‑sized industrial electricity users in the UK are paying roughly 80–100% more than the EU14 median, and more than the average across the wider EU27.
• Small business electricity users in the UK pay around 30–40% more per kWh than comparable EU small consumers.
• Gas prices for UK businesses are closer to the European median, but because gas still sets the wholesale power price, higher gas costs continue to feed through into electricity bills.

Day‑ahead wholesale prices also show Great Britain near the top of the European pack on many days, even as prices have come down from their 2022 peak.

For reference, day-ahead rates are the spot market prices suppliers pay for energy to be delivered in the next 24 hours. These rates often determine what you pay on a variable contract and are usually more expensive than forward delivery prices, which are used for fixed-rate contracts (hence, variable contracts are often more expensive than fixed-rate contracts). 

You can find out more in our guide to how energy is bought and sold.

The table below shows the UK sitting in the upper‑middle of European day‑ahead power prices, more expensive than France and Spain but cheaper than many Northern markets. France and Spain are clear low‑price outliers, helped by strong nuclear capacity (France) and a growing mix of renewables and interconnectors (Spain). 

In contrast, the highest prices appear in Nordic and Northern countries such as Finland, Sweden, Denmark and Norway, where weather‑sensitive hydro and wind output can push prices sharply higher when conditions are tight. 

For the UK, these wholesale differences echo the wider pattern that British businesses often face comparatively high energy costs, influenced by its islanded system (whereby the power grid operates independently from larger networks), network charges, policy levies and less efficient post‑Brexit power trading with the EU, even though wholesale prices are only one part of the final bill.

^{Note: UK day-ahead rates taken from February 24, 2026, as per Northern Gas and Power website. European day-ahead rates taken from May 30, 2025 as per EU Energy website.}

Why are energy prices different across Europe?

Let’s break down the key reasons prices vary so much from one country to the next.

• The energy mix — Not all countries rely on the same fuel sources. France’s use of nearly 70% nuclear energy, Sweden’s hydro capacity, and Spain's greenlighting of almost 300 renewable energy investments, particularly in solar, all help to buffer them from the volatility of the fossil fuel market.
• Market regulations — In many European countries, the energy market is more tightly regulated. Some governments, such as Norway and Bulgaria, have direct control over pricing structures or enforce strict caps, limiting the exposure of small businesses to sudden spikes in energy prices.
• Government support and caps — During the recent energy crises, several European governments moved quickly to introduce temporary price freezes, subsidies, or tax breaks for SMEs, like in France and Germany. These interventions helped limit the worst of the cost increases.
• VAT and energy tax policy — Although a reduced rate is available in the UK, most businesses pay 20% VAT on energy. Each country has its own rules on VAT and energy, but lower VAT rates can lead to lower bills overall. That difference alone can translate to some big savings each month. Remember, if you're VAT-registered in the UK, then you should be able to claim back the VAT you pay on energy bills.

Are business energy prices going down in Europe?

There has been a gradual decline in wholesale gas and electricity prices across Europe since early 2024, helped by milder winters, higher liquefied natural gas (LNG) imports, fuller storage and stronger renewable generation. But that doesn’t mean all businesses are seeing their bills fall at the same pace.]

In the UK, some businesses may still be on fixed‑rate contracts that were agreed during or just after the energy crisis, at much higher price levels than we see today. Unless they were able to renegotiate – for example, via blend and extend contracts, where suppliers spread the cost over a longer term – they won’t feel the benefit of lower wholesale prices until renewal.

Some EU countries introduced targeted support, such as price buffers, temporary bill discounts or regulated tariffs for small businesses, which can reduce the gap between their prices and those in the UK. In Britain, recent support has been more limited and is now largely focused on very energy‑intensive industries rather than typical SMEs.

If you’re in this position and your contract is up for renewal, now could be a good time to compare business energy quotes and lock in rates for your next one.

Can UK businesses switch to a European energy supplier?

In short, no. Business energy markets are regulated by national frameworks, so UK businesses can only sign contracts with UK-licensed suppliers.

However, multinational energy providers, like EDF or E.ON, operate in both regions and may apply different pricing strategies in each market.

Has Brexit impacted energy prices?

Brexit hasn’t directly caused energy prices to rise, but it has added to the complexity. The UK no longer participates in the EU’s Internal Energy Market, which previously helped with cross-border trading and price stability. 

There’s also more red tape and uncertainty around energy imports and long-term supply contracts, which can lead to added costs for suppliers and, eventually, customers.

How often do energy prices change in the UK and Europe?

Wholesale prices change daily, but the rate your business pays will depend on your contract. In the UK, most SMEs are on fixed-rate deals, which means prices only shift at renewal.

In Europe, some businesses are on more flexible, index-linked tariffs that reflect wholesale prices more regularly, though these carry their own risks during periods of volatility.

What does this mean for UK SMEs?

For many UK small businesses, higher‑than‑European‑average energy prices translate into tighter margins, hard choices on investment and staffing, and extra pressure just to keep the lights on.

Sectors that use a lot of electricity – such as hospitality, manufacturing, cold‑storage, leisure and retail – can feel this particularly sharply, especially if they’re competing with European suppliers who pay less for power.

Although SMEs can’t change how the wholesale market works or how policy costs are recovered, they can take steps to reduce usage, improve energy efficiency and make smarter choices about how and when they buy energy.]

What can UK SMEs do about high energy prices?

Here are some practical actions to help soften the impact:

• Audit and cut your usage – Identify quick wins like LED lighting, controls, maintenance and behaviour change, then plan bigger upgrades over time.
• Compare deals at the right time – Don’t let your contract roll onto out‑of‑contract rates; start comparing months before renewal to lock in competitive terms.
• Choose the right contract type – Decide whether a fixed, flexible or pass‑through contract best fits your risk appetite and cash‑flow.
• Explore on‑site generation – Solar PV, heat pumps or other decentralised options can reduce how much you rely on grid power over the long term.
• Check for grants and support – Look at national and local schemes that support energy efficiency or low‑carbon investments for SMEs.
• Get expert help – Use a broker like Bionic to navigate the market, understand your options and negotiate better rates where possible.

Save on your energy bills with Bionic

UK SMEs are facing some of the highest energy costs in Europe, and while some of the reasons are out of your hands, knowing why you’re paying more can help you take back a bit of control.

From understanding the energy mix to exploring smarter tariffs and investing in renewables, there are options to make your energy spend go further.

Want to know if you’re getting the best deal? Our energy experts can compare tariffs from trusted UK suppliers and help you switch to a smarter contract to get the best business energy, gas, or electricity for you. Or, head over to our energy guides to find out everything you need to know.

FAQs on UK and European energy price differences

Here’s an at-a-glance guide to some of the most frequently asked questions about UK and European energy price differences:

Why are UK business electricity prices higher than in most of Europe?

UK business electricity prices are higher mainly because of gas‑led power pricing, higher network and policy costs on bills, and fewer exemptions for typical SMEs than for heavy industry.

Do UK small businesses pay more for energy than larger firms?

Yes, smaller businesses often pay higher unit rates than large users due to less buying power, shorter contracts, higher perceived risk and fewer levy exemptions

How much more do UK businesses pay for electricity compared with the EU average?

Recent analysis suggests UK medium‑sized industrial users pay around 80–100% more for electricity than the EU median, with small users also paying significantly above EU averages.]

Are business energy prices falling in the UK?

Wholesale prices have fallen from their 2022 peaks, but many SMEs are locked into older fixed contracts and UK electricity prices remain much higher than pre‑crisis levels.]

Why don’t UK SMEs feel the benefit of lower wholesale prices straight away?

Because suppliers hedge by buying energy in advance, SMEs on fixed deals don’t fully benefit from lower wholesale prices until they renew their contracts.]

What can UK small businesses do to cut their energy bills?

SMEs can reduce usage through efficiency measures, compare and time their contracts carefully, consider on‑site renewables and look for available grants or support.]

Will government schemes to cut industrial energy costs help SMEs?

Most recent UK schemes focus on large energy‑intensive industries, so typical SMEs see little direct relief and still face some of the highest electricity costs.]

How can Bionic help my business cope with high UK energy prices?

Bionic can compare business energy quotes from a panel of suppliers, explain your options and help you switch to a tariff that better fits your budget and usage.