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UK energy market risks: How global gas prices and policy changes could affect your restaurant or shop’s energy costs

Recent UK energy market risks and policy shifts may influence wholesale costs and future contracts for restaurants and small shops. Understand the links.

Opening: Why UK energy market risks matter for your restaurant or shop

Recent developments in the UK energy market could signal higher wholesale costs for independent restaurants, cafés, takeaways, and small shops. Energy UK, the industry’s trade association, has warned that rising wholesale gas prices—driven by international conflicts like the Middle East crisis—may push the January 2027 household price cap up by £350, reaching around £2,100 annually for a typical home. While this cap applies to households, wholesale price volatility can ripple through to business energy contracts, potentially affecting the terms or costs of fixed-term deals for small businesses.

This article explains the key market risks, how they might transmit to your energy bills, and what policy changes could shape future contracts.

What happened: Key facts behind the market risks

  1. Wholesale gas prices remain volatile Energy UK projects that the January 2027 household price cap will rise by £350, reaching approximately £2,100 annually for a typical household. This increase is driven by high wholesale gas prices, partly due to global events like the Middle East conflict. While the price cap doesn’t apply to businesses, wholesale price spikes can increase supplier hedging costs, which may later affect the pricing or terms of fixed-term contracts for small businesses (Energy UK, 2026).

  2. UK’s long-term exposure to gas price swings Over the last five years, the UK has spent an extra £100 billion on wholesale gas without receiving additional supply. This highlights the country’s ongoing reliance on imported gas, which leaves businesses vulnerable to price spikes during global disruptions. For restaurants and shops, this means wholesale costs could rise unpredictably, influencing future contract offers (Energy UK, 2026).

  3. Policy costs may shift from bills to taxation Energy UK is urging the Government to move remaining policy costs—such as the Renewables Obligation and Feed-in Tariff—from electricity bills into general taxation. This could lower long-term costs for businesses switching to electric solutions (e.g., heat pumps or electric vehicles). However, short-term wholesale risks remain tied to gas market fluctuations, which may still affect energy contracts (Energy UK, 2026).

  4. Rising customer debt could increase costs for all bill payers Customer energy debt is projected to reach a record £7 billion by the end of 2026. Bad debt costs are already adding an average of £67 per year to all bill payers’ costs. For small businesses, this could mean higher overheads, particularly for those on variable or flexible contracts, where supplier costs are passed through more directly (Energy UK, 2026).

How the market link works: From global gas to your energy contract

1. Wholesale prices and supplier hedging

Wholesale gas prices are set by global markets, influenced by factors like geopolitical tensions, supply disruptions, or changes in demand. When wholesale prices rise, energy suppliers face higher costs to buy the gas or electricity they sell to businesses. To manage this risk, suppliers often hedge (lock in prices in advance) for their customers. If wholesale prices spike, suppliers may increase the prices they charge businesses when contracts are renewed or adjusted.

For example, if a supplier hedged gas at a lower price last year but wholesale prices have since risen, they may offer less competitive rates when your fixed-term contract ends. This doesn’t mean your bill will definitely rise, but it creates upward pressure on future offers.

2. Policy costs and electricity bills

Currently, some policy costs (like support for renewable energy) are added to electricity bills. Energy UK is pushing for these costs to move into general taxation instead. If this happens, electricity bills could become cheaper over time, making electric solutions (e.g., induction cooking or heat pumps) more attractive for restaurants and shops. However, this change would take time, and gas price volatility would still affect businesses reliant on gas for heating or cooking.

3. Bad debt and business tariffs

When households struggle to pay energy bills, suppliers incur costs to manage debt. These costs are often spread across all customers, including businesses. If bad debt rises—as projected—suppliers may increase prices to cover these losses. For small businesses on variable or flexible contracts, this could mean higher rates, as these contracts often reflect supplier costs more directly than fixed-term deals.

What this does not prove

  • This is not a price forecast for your business. The £350 increase applies to the household price cap, not business energy contracts. Wholesale risks signal potential upward pressure on costs, but your actual bill depends on your contract type, supplier hedging, and market conditions at renewal.
  • No supplier action is guaranteed. Suppliers may absorb some costs or adjust hedging strategies, so wholesale risks don’t automatically translate to higher business tariffs.
  • Policy changes are proposals, not guarantees. Moving policy costs into taxation would require Government action and may take years to implement. Short-term wholesale risks remain the dominant factor for energy contracts.

What owners can monitor or check now

  1. Track wholesale gas prices Wholesale gas prices are a key driver of energy costs. You can monitor them via industry reports (e.g., National Grid’s Winter Outlook) or energy market news. Rising prices may signal higher contract renewal offers in the coming months.

  2. Review your contract type If your business is on a variable or flexible contract, wholesale price spikes or bad debt costs may affect your rates sooner. Fixed-term contracts lock in prices but may be less competitive if wholesale prices fall. Consider your risk tolerance when renewing.

  3. Watch for Government policy announcements Keep an eye on updates about moving policy costs (e.g., Renewables Obligation) into taxation. If implemented, this could lower electricity costs over time, making electric solutions more viable for your business.

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Last checked: 2026-10-11