Gas price 15-month low gives small business owners potential reprieve

Gas prices have caused agony among small business owners in recent months, with prices skyrocketing due to inflation and the war in Ukraine.

Many small businesses have been forced to close their premises as energy bills doubled or trebled. 

There may be welcome news on the horizon as gas prices have currently dropped back to more normal levels at the moment. But, a note of caution has already been struck, with warnings about further rises later in the year.

Many small business owners will find themselves looking to change contracts in case there is any option of avoiding the worst impact of further rises.

Gas prices see a drop after months of inflation

After months of rising gas prices, businesses will be desperate for some relief now that gas prices have fallen back to levels not seen in over a year. 

This drop in prices comes after a period of staggering gas price inflation, leaving many businesses struggling to pay their energy bills. Business energy rates were not protected by the same price caps that were put in place for consumers over recent months, causing many to shut up shop altogether.

With the summer months fast approaching, many businesses will be relieved to be able to switch off their thermostats after months of painful winter bills. However, gas usage among businesses goes far beyond keeping the heating on – for the restaurant sector, for instance, there’s far less of a seasonal change.

The calm before the storm?

Despite gas prices dropping to a 15-month low, experts warn that the situation may be temporary.

Speaking at their Vulnerability Summit last month, Ofgem chief executive Jonathan Grearly stated that ‘it is unlikely prices will return to those seen before 2021’.

Worse still, Goldman Sachs predicts a potential threefold increase in gas prices this winter. 

The UK’s potential upcoming gas supply shortage, combined with increased global demand and reduced supply, could lead to continued price volatility. 

Next steps for small business owners

The drop in gas prices is a welcome relief for those who have been dealing with the high cost of energy for months. At this juncture, it may be wise to take advantage and save where you can.

Business owners fretting over their bills have been left to ponder two main concerns:

“Should I lock into a long contract now, or could prices drop further?”

It’s worth heeding Goldman Sachs’ predictions – waiting for further drops could be risky. Considering your budget and energy usage and finding ways to save is all well and good, but if prices suddenly skyrocket again, you could still be left vulnerable. If you are able to find a contract that allows you to lock in at today’s lower prices, this could be a smart option – provided you can find a supplier willing to offer a decent time span without price rises hitting. 

“Can I exit my current contract if it ties me to higher prices, or will there be penalties?”

It’s best to review the terms of your contract and check for any early termination fees or penalties, as every provider is different. If you’re able to exit the contract without incurring significant costs, it may be worth considering a switch to a more favourable plan or provider. However, it’s important to weigh the potential savings against any costs associated with breaking the contract. 

While the current drop in gas prices brings relief to UK small businesses, it’s important to remain cautiously optimistic as future increases could be anticipated. Nonetheless, this temporary respite offers a glimmer of hope, allowing businesses to better manage their expenses and foster growth in the challenging economic landscape.

More on this – see our guide to the top small business gas suppliers