Fixed vs variable business energy tariffs: which is right for your business?
Fixed-rate tariffs — the SME default for a reason
A fixed-rate business energy tariff locks both your unit rate and your standing charge for the length of the contract. Whatever wholesale gas or electricity does — up, down, sideways — your unit rate doesn't move. For most UK SMEs, that certainty is worth more than the theoretical possibility of a variable tariff falling below fix rates for a stretch.
Variable tariffs — flexibility with a price tag
Variable-rate tariffs move with the wholesale market, usually with a small margin added by the supplier. If wholesale falls dramatically, you benefit within 1-2 billing cycles. If it rises, you're exposed. Variable can suit businesses with strong cash flow, or who have a genuine market view they want to trade against.
How to actually decide
The honest answer: unless you're running an energy trading desk or your business has natural cost-passthrough (e.g. long-term customer contracts that reprice with your energy bill), fixed almost always wins on peace of mind. The 5% or so annual variance a variable tariff might save in a good year isn't worth the risk of a 40% winter spike.
Flexible tariffs — the third option for large users
For businesses over 400,000 kWh/year, flexible or 'basket-purchase' tariffs let you buy your annual energy in tranches at different points against the wholesale market. This is neither fixed nor variable — it's active energy management, and it requires an internal resource or a specialist consultant to run well.
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