Where in the UK Do Businesses Pay the Most for Energy?

October 2, 2025 by Admin

Running a business in the UK has never been more challenging. Rising costs, tighter margins, and an uncertain economic outlook mean that controlling overheads has become a survival strategy. One of the biggest line items for many businesses is energy. But depending on where in the country you operate, your energy bill could be significantly higher or lower than a rival just a few hours away.

In this article, we break down regional differences in business energy costs across the UK using official data from the Department for Energy Security and Net Zero (DESNZ, formerly BEIS), the Office for National Statistics (ONS), and insights from the energy regulator Ofgem.

 

Why Do Energy Prices Vary Across the UK?

Most business owners assume that energy costs are broadly the same across Britain. In reality, electricity and gas tariffs vary widely by region. This isn’t just about wholesale markets or supplier competition,  it comes down to the structure of the energy system itself.

Regional variations are mainly driven by:

• Distribution and network charges – Each region is served by a Distribution Network Operator (DNO), and their charges are passed onto end users. Businesses in some areas face much higher standing charges as a result.
• Supply competition – In densely populated or urban regions, suppliers are often more competitive, which pushes prices down. In rural or lower-density areas, tariffs are less competitive.
• Metering and cost-to-serve differences – Smaller businesses and those in remote areas often pay proportionally more because of higher operational costs for suppliers.

 

Which Regions Pay the Most for Business Electricity?

According to official DESNZ non-domestic price statistics, businesses in:

• North Wales
• Merseyside
• Cheshire

consistently face the UK’s highest average electricity bills. Analysis by Uswitch Business found that the average small-to-medium firm in this region can pay up to 13% more than businesses in London for the same consumption.

By contrast:

• London
• South East

benefit from some of the lowest average electricity costs. This is partly due to higher density, more competition between suppliers, and lower per-unit distribution charges.

For businesses consuming around 25,000 kWh annually, a typical SME profile, this can mean a difference of several hundred pounds per year depending on where your office, shop, or factory is located.

Ofgem’s non-domestic market reports confirm that regional network costs have become a growing share of overall business bills in recent years, particularly as wholesale volatility feeds through into standing charges.

 

Why the South West Faces the UK’s Highest Business Gas Bills

When it comes to commercial gas:

• South West

frequently emerges as the most expensive region for businesses. DESNZ data shows that per-unit prices are higher here than in much of the Midlands or Northern England.

This is partly explained by infrastructure. Gas networks in some parts of the South West are older and more dispersed, leading to higher distribution charges. For a business using around 100,000 kWh annually, typical for a medium-sized hospitality or light industrial firm, this could add more than £1,000 per year compared with an identical business in the West Midlands.

Regional differences in gas are particularly impactful for energy-intensive industries, such as food manufacturing, ceramics, and chemicals. The ONS analysis on energy costs and UK businesses highlights how rising gas prices have forced some manufacturers to scale back production.

 

Why Business Water Costs Differ Across the UK

It isn’t just energy that exposes regional inequalities for UK businesses, water bills also vary depending on where you operate. Since the English business water market was deregulated in 2017, companies can choose their water retailer, but the underlying charges are still set by local wholesalers such as Thames Water, Severn Trent, United Utilities, or South West Water.

For many SMEs, water and wastewater services are a smaller line item than electricity or gas, but the differences between regions can still add up. According to Ofwat’s market reports (Ofwat Business Retail Market), businesses in the:

• South West

face some of the highest charges in the country, largely because of the high costs of maintaining water infrastructure across a coastal, rural landscape. This echoes the same pattern seen in energy: the South West often tops the table for utility costs.

By contrast, businesses in:

• London
• Midlands

often benefit from more competitive water bills due to economies of scale, denser populations, and more efficient networks. Large industrial users in these regions can negotiate more favourable rates, especially if they manage consumption carefully and shop around for the best retail deals.

For SMEs, water costs might only run to a few hundred or a few thousand pounds per year. But combined with regional disparities in electricity and gas, the cumulative effect can make a real dent in competitiveness. For example, a small café in Exeter could be paying hundreds more annually for utilities than a similar café in Birmingham, purely due to location.

As with energy, the best strategy for businesses is to review contracts regularly, switch retailers when possible, and reduce consumption through efficiency measures. Services like Tariff.com can help businesses understand their options across electricity, gas, and water, turning utility costs from a fixed overhead into a managed expense.

Regional Energy Inequality in Context

Energy costs aren’t the only business input that varies regionally. Rent, wages, and transport infrastructure also differ across the country. But unlike those, energy is not a discretionary spend, every business needs it to operate.

This makes the Regional Energy Price Index an important benchmark. Policymakers, councils, and business groups can use it to lobby for fairer treatment or targeted relief in the hardest-hit areas. The government has already introduced schemes such as the Energy Bills Discount Scheme, which offered some support to non-domestic consumers through 2024, but critics argue that it failed to account for regional disparities.

 

How Businesses Can Cut Energy Costs Anywhere in the UK

No matter where a company is based, there are always steps that can be taken to bring energy costs under control. It’s true that businesses can’t change the distribution network that serves their region, but they can influence how much they pay through smart purchasing decisions and better energy management.

One of the most effective tactics is to review contracts regularly and switch suppliers when necessary. Many firms are still tied to expensive “deemed” or out-of-contract rates, which are among the most costly tariffs on the market. By comparing offers and moving to a new supplier, it’s possible to cut bills significantly.

For companies that value predictability, fixed-term contracts can provide stability against volatile wholesale markets. Knowing exactly what you’ll pay for the next 12, 24, or even 36 months makes it easier to plan budgets and manage cash flow.

Savings don’t have to come only from the tariff side. Investing in energy efficiency, whether through LED lighting, improved insulation, or smarter equipment, reduces consumption at source. Even modest efficiency improvements can offset the higher standing and network charges that some regions face.