When it comes to managing business energy costs, small and medium-sized enterprises (SMEs) are often faced with a critical decision: fixed or variable energy contracts? With market volatility and operating costs on the rise, making the right choice can directly impact your bottom line.
In this guide, we’ll explain what each type of contract means, explore their pros and cons, and help you decide which is the better fit for your business.
A fixed energy contract locks in your unit rate for electricity or gas over a set period—usually 12, 24, or 36 months. While your usage may vary, the price per kilowatt hour (kWh) remains constant for the duration of the contract.
Price Stability: Know exactly what you're paying per unit, regardless of market fluctuations.
Easier Budgeting: Predictable bills make cash flow planning simpler.
Protection Against Market Spikes: You’re shielded if wholesale prices rise sharply.
No Benefit from Price Drops: If market rates fall, you're stuck paying more.
Exit Fees: Early termination often incurs penalties.
Long-Term Commitment: Less flexibility if your business needs change.
A variable energy contract means your unit rate is tied to wholesale market prices. Your bill could change month to month based on market conditions.
Potential to Save When Prices Drop: In a falling market, you may pay less than fixed-rate customers.
Flexibility: Easier to switch or renegotiate when prices are favourable.
Short-Term Options: Good for businesses with uncertain future plans or moving premises.
Risk of Price Spikes: Sudden increases in the market can lead to unpredictable bills.
Harder to Budget: Monthly fluctuations can complicate financial planning.
Less Protection: No insulation from global energy events or crises.
The right contract depends on your business size, risk appetite, and financial stability. Here's a quick comparison:
| Criteria | Fixed Contract | Variable Contract |
|---|---|---|
| Best For | Budget-conscious SMEs | Flexible, risk-tolerant SMEs |
| Risk of Market Spikes | None | High |
| Savings in Price Drops | No | Yes |
| Contract Length | 1–3 years | Rolling or short-term |
| Billing Predictability | High | Low |
At The Utilities Group, we generally recommend fixed contracts for most SMEs—especially those looking for long-term cost control. In today’s volatile energy market, locking in a competitive rate offers peace of mind and financial certainty.
However, if your business can handle some risk and prefers short-term flexibility (e.g., you're relocating, scaling rapidly, or anticipating price drops), a variable contract could be worth exploring.
Choosing the wrong energy contract can cost your business thousands over the course of a year. Our team at The Utilities Group compares rates from over 15 major suppliers to find a contract that suits your business goals and risk profile.
👉 Get in touch today for a free quote and honest advice—no pressure, just savings.
Ready to take control of your energy costs?
Call us on 0151 5416767 to speak with a dedicated account manager.