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

Running a small business in the UK comes with enough challenges without the added pressure of sky-high energy bills. Yet, compared to our European neighbours, UK businesses are shelling out significantly more for their gas and electricity bills.

In this Bionic guide, we take a closer look at how the UK’s energy landscape stacks up against the rest of Europe, explore the key reasons for the price gap, and break down what this means for SMEs across the country. 

Why are UK business energy prices higher than in Europe?

There's no single reason behind the UK’s higher energy costs, but a mix of market structure, policy choices, and geographical limitations all play a part. 

Reliance on gas and global markets

Unlike some European countries with greater access to nuclear or hydroelectric power, 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 — due to global events, supply issues or increased demand — UK businesses often feel the effects faster and more sharply. 

Slower renewable investment

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

Countries like Germany and Denmark have built larger, more consistent renewable energy sources, helping to stabilise costs. Meanwhile, the UK’s mix still includes a significant proportion of fossil fuel generation.  

Infrastructure lag

Our ageing infrastructure often requires costly upgrades and maintenance, and these costs are passed down to end users. 

Although the switch to sustainable energy in the UK is in motion, systems in countries like France, Sweden and Germany have been modernised more rapidly, making them more efficient and cheaper to operate.

Taxes, levies and standing charges

UK energy bills include a range of different costs — from standing charges to government levies — that don’t always apply in the same way across Europe. 

These extras can quickly bump up the total cost, even if your usage stays the same.

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 much are small businesses paying on average in Europe for energy compared to the UK?

With so many different countries and markets to consider, it’s difficult to know how much businesses on the continent are paying for energy compared to those in the UK. 

But to get an idea, we can compare the day-ahead rates for the UK with those from other major European countries. 

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). 

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

While Sweden, Norway, and Finland appear to be a bit of an outlier in that they pay much less for energy than the rest of the continent, the UK is paying roughly a quarter more for energy than most other European countries, with the exception of Italy which has even higher prices.

^{Note: UK day-ahead rates taken from May 30, 2025 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-registrd 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 slow decline in wholesale prices across Europe since early 2024, helped by mild winters, increased liquefied natural gas (LNG) imports, and stronger renewable generation. However, not all those savings are reaching businesses just yet,

In the UK, some SMEs are still stuck on fixed tariffs agreed during the energy spike. Unless these businesses were able to get off these expensive contracts - blend and extend contracts were one solution that was offered to some businesses - they won’t benefit from falling prices until their current contract ends.

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.

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.