Is Fixed or Variable Business Gas Cheaper?

Companies committing to a 24-month fixed deal are typically seeing rates around 7.8p/kWh, according to data published by Connection Technologies in April 2026.

Variable rates are harder to pin to a single figure, because they often move. But the pattern is clear: businesses that let a contract lapse and roll onto a default variable or deemed rate consistently pay more. According to research published in December 2025 by Meet George, deemed (out-of-contract) rates can run 50-80% higher than a negotiated fixed rate.

These are the rates your supplier automatically applies when your contract ends and you haven't renewed or switched. Unlike domestic consumers, commercial customers have no Ofgem price cap protecting them.

For a business using 20,000 kWh of gas annually, the difference between a fixed rate of 7.8p/kWh and a variable/deemed rate of around 11-13p/kWh represents an extra £640-£1,040 per year without using any more gas.

The UK Government's Quarterly Energy Prices report, published in March 2026, recorded an average gas price for industrial and commercial users of approximately 3.5p/kWh - a figure that reflects large-scale users with significant negotiating power.

Most SMEs sit well above that bracket. For average UK business energy prices in 2026, the range relevant to typical small businesses is closer to 6.5p-9p on fixed contracts.

The figures above reflect live UK market pricing in mid-2026 and will vary by supplier, region, and contract terms.

Top UK Business Gas Suppliers

The UK commercial gas market is relatively concentrated, with around a dozen suppliers covering the majority of business demand. Here’s a snapshot of the most active and widely used suppliers:

These suppliers range from ‘Big Six’ incumbents to mid-market specialists and independents, with pricing differences of 20-30% between quotes on the same meter common.

Pros and Cons of Fixed-Rate Business Gas

Fixed contracts are the default choice for most UK SMEs. Here’s what works in your favour when you choose to fix:

• Budget certainty: When you know your gas rate for the next 12, 24 or 36 months, cash flow planning is more straightforward. For firms with thin margins like a restaurant, a small manufacturer, or a care home, this predictability is worth paying a premium for.

• Protection from price spikes: Gas markets are affected by LNG supply disruptions, geopolitical tensions, and particularly cold winters. In recent years, we’ve seen wars in Ukraine and Iran have a big impact. A fixed contract insulates you from these shocks.

• Usually cheaper than variable: Fixed rates tend to come in lower than variable or deemed rates across most contract periods, because the supplier prices in a margin to reflect market risk.

Below are the trade-offs to consider before fixing your business gas prices:

• Exit fees: Most fixed contracts come with early termination charges. Energy Solicitors note these typically range from £5 to £60 per fuel type, though they can be higher on longer commercial contracts.

• You won't benefit if prices fall: If you lock in at 8p/kWh and the market drops to 6p, you're stuck paying the higher rate until your contract ends. That's a genuine risk in periods of volatile wholesale prices.

• Rollover risk: If you miss your notice window (which typically runs one to six months before the contract end date), your supplier can auto-renew you onto a contract at rates that may not be competitive. Always note your end date and how to avoid deemed contract rates.

Pros and Cons of Variable-Rate Business Gas

Variable contracts suit a smaller set of circumstances, but they have their place in the business gas market. Here’s what works in your favour with a variable-rate tariff:

• No exit fees: Variable contracts let you switch suppliers or tariffs without penalty, which is valuable if you're in short-term premises, expecting a move, or simply want more flexibility.

• Savings when markets fall: If wholesale gas prices drop during your contract period, a variable rate can bring your bills down automatically. This is particularly relevant for businesses that can handle some volatility.

• Short-term stopgap: If you're waiting for a better fixed deal, a variable rate can bridge the gap without locking you into a full contract term.

It’s worth considering these notable trade-offs before opting for a variable-rate gas contract:

• Exposure to price rises: This is the key risk. Business gas has no Ofgem price cap equivalent, so your energy supplier is within their rights to raise variable rates whenever market conditions justify it. The 2022 energy crisis is a vivid reminder of how damaging that exposure can be.

• Difficult to budget: If your gas costs change quarterly, financial planning becomes tricky. For companies with employees, stock commitments and other fixed overheads, an unpredictable energy bill adds operational stress.

• Variable rates tend to be higher: In most realistic market scenarios, the base variable rate is higher than the available fixed rate. Customers on this contract type typically pay a flexibility premium.

Fixed vs Variable: Direct Comparison

For most UK businesses, the fixed contract wins on price over the course of a full contract term. The key question is whether the timing of your fix is good. Locking in during a period of temporarily elevated rates and then watching prices fall is a real risk, but predicting it is notoriously difficult.

How Contract Length Affects Your Fixed Rate

Fixed contracts aren't uniform. A one-year deal and a three-year deal will have different rates, and the relationship between length and price shifts depends on where the wholesale market is heading.

In a market with a falling curve, shorter contracts often offer comparable or lower rates because suppliers aren't pricing in future risk as aggressively. In a rising market, longer contracts can lock in rates before they climb further.

A WeSave analysis published in May 2026 concluded that most SMEs renewing between April and September 2026 would find that a one or two-year fixed deal provides the best balance of stability and the ability to reprice in the medium term. Three to five-year deals are worth considering if your energy usage is large and your premises are long-term.

It's also worth understanding what's included in your fixed rate. Some 'fixed' contracts only lock in the commodity (wholesale) element and leave non-commodity costs (network charges, transmission costs, levies, etc.) open to movement. A pass-through contract works this way, and there is a meaningful distinction. For a full breakdown of how these differ, our guide on pass-through vs fully fixed energy contracts explains the differences in detail.

Out-of-Contract and Deemed Rates

This is where UK businesses are losing real money every year. If your fixed contract ends and you haven't renewed or switched, your supplier places you on a deemed or out-of-contract rate. These rates are among the most expensive on the market.

There's no Ofgem protection for business customers, so suppliers can set them freely, and they will often be an eye-watering 50-80% above market rate.

Business energy contracts typically include a notice window opening one to six months before the end date. Missing it can result in automatic rollover onto a new supplier-chosen contract, often at unfavourable rates. Set a calendar reminder six months ahead, and start comparing your business gas options before the window closes.

Our SME energy saving tips guide covers additional ways to reduce bills beyond getting a cheaper tariff.

Extra Costs: Business Gas VAT and the CCL

Whatever rate you're on, business gas is subject to 20% VAT (reduced to 5% for some low-usage businesses). Most commercial users pay the full 20%, which means a 7.8p unit rate actually costs 9.36p including VAT.

The Climate Change Levy (CCL) adds a further charge on top for eligible businesses. Check the Government's current CCL rates if you're unsure whether this applies to your company.

These additional charges apply to fixed and variable-rate customers equally, so they don't affect the comparison between the two contract types. But they do affect your total cost significantly and are easy to overlook when comparing unit rates.

Which Contract Type is Right for Your Business?

The answer ultimately depends on three things: your need for budget predictability, your business circumstances, and your view of where gas prices are heading (acknowledging that nobody gets this spot on consistently).

Fixed is the better choice if:

1. You need predictable costs for budgeting

2. Your business has tight margins

3. You're in stable, long-term premises

4. Wholesale gas prices are currently at a comfortable level

Variable is worth considering if:

1. You're in short-term premises

2. You need the freedom to switch quickly

3. You have a strong, flexible cash flow

4. You have reason to believe gas prices will fall

For the majority of UK small businesses, the fixed-rate contract offers a better combination of price and protection. The variable rate's advantage lies in catching falling prices, but this rarely outweighs the exposure it creates in volatile gas markets.

Getting the Cheapest Business Gas Rate

It’s worth noting that the rate you're quoted varies by your annual consumption, meter type, location, credit profile, and the suppliers actively competing for your business at the time. Two firms with the same postcode and usage could receive completely different quotes.

The most effective way to find a cheap fixed rate is to compare across multiple suppliers. BusinessComparison lets you compare business energy from a range of highly-rated suppliers, so you can see current fixed and variable rates across your options without having to approach each provider individually.

Our guide to the best business energy suppliers for small companies in 2026 offers a useful overview of which suppliers are currently competitive in the UK business gas market.