Energy bills rose again today. Ofgem's regulated price cap increased by 4% from Thursday 1 October, taking the average dual-fuel bill for a typical home in Great Britain to £1,723 a year. On the same day, diesel hit a record high of close to £2 a litre, pushing up the cost of moving anything — stock, staff, tools — on UK roads. Both landed four weeks before a Budget on 28 October that is already being talked about as the moment some of this gets paid for.
None of these numbers individually will surprise a business owner who has watched costs climb all year. What's worth stopping on is that they are moving at the same time, from different directions, while the one date that might tell you what the government intends to do about any of it is still four weeks away. Waiting for Budget day to find out what your own cost base looks like is the expensive way to find out.
What actually changed on 1 October
Three things moved together. First, Ofgem's quarterly price cap rose 4%, taking the average household bill to £1,723 a year — working back from that percentage, the increase itself is around £66 a year. Second, Andy Burnham's six-month VAT cut on electricity bills, introduced the same day, is expected to save the average household about £45 a year, which the government says keeps the cap £45 lower than it would otherwise have been. Net the two together and most households are still roughly £21 a year worse off than before the cap rose, despite the cut. Third, and reported in the same piece, diesel prices reached a record high of close to £2 a litre this week, which the Guardian links to the war in Iran pushing up the global oil price.
Why this doesn't directly touch your business energy bill
The Ofgem price cap is a household protection. It has never applied to business gas or electricity, which are bought on negotiated contracts, usually fixed for one, two or three years through a supplier or broker, and are not regulated the same way. A 4% rise in the domestic cap does not, by itself, change what a shop, salon, clinic or office is paying its own supplier this quarter.
Where it bites is less direct but still real for three groups. A sole trader or freelancer working from home is paying the capped rate on the same meter that runs the business — the rise is a genuine cost whether they're a landlord, a graphic designer or a bookkeeper. A consumer-facing business is selling into households that have just got less disposable income, not more, at exactly the time of year footfall usually needs it. And every business, regardless of sector, is a few weeks from a Budget where ministers are reportedly weighing up moving the levies that fund clean energy projects off household bills and onto general taxation — a shift reported to save households an average of £120 a year but which might require raising roughly £3bn elsewhere. That £3bn has to come from somewhere, and business taxes are as plausible a source as personal ones.
What record diesel actually costs a business with a van
Diesel is a different story, because there is no cap of any kind standing between the pump and a trade business. Take a plumber or electrician covering 18,000 business miles a year in a van doing a realistic 38 miles to the gallon — a fair estimate for a loaded panel van on mixed urban and rural driving, not a best-case figure.
| Illustrative trade van, 18,000 business miles a year at 38mpg | Amount |
|---|---|
| Fuel used (18,000 miles ÷ 38mpg × 4.546 litres/gallon) | ≈2,153 litres |
| Cost at today's near-£2-a-litre diesel price | ≈£4,306 |
| Per month | ≈£359 |
| Per week | ≈£83 |
That is roughly £4,300 a year on diesel alone, before servicing, insurance, finance or anything else that keeps a van on the road — and it moves in direct proportion to the pump price, with no equivalent of a price cap or a VAT holiday attached to it. A haulage firm, a mobile hairdresser, a courier or a building contractor running several vehicles is looking at that figure multiplied by every van on the fleet.
What to do this week
Put a number on your own exposure rather than estimating it. If fuel or energy is a meaningful line in your costs, run the actual figure through your management accounts this month, so you know the real number before supplier price lists or pump prices move again, not after. If a business energy contract is coming up for renewal in the next few months, get quotes now rather than waiting — Cornwall Insight's forecast below is a reason to lock in terms early, not a reason to assume rates will fall. If you're a sole trader or director whose own household bill effectively subsidises home-working costs, run both budgets side by side in a cashflow and budgeting review rather than treating them as separate. Keep an eye on the 28 October Budget itself through our tax planning service — if the levy shift goes ahead, it changes the shape of several tax lines at once, and acting the week it's announced beats reacting to it in January.
This follows the same pattern as the interest rate rise we covered last week, where the number that actually matters is rarely the headline percentage itself — see what rising rates already cost your business.
What's still uncertain, and when we'll know
Three things are still open. Whether the VAT holiday on electricity is extended beyond its current six months will not be confirmed until the Budget on 28 October. Whether the levy shift happens, and how the resulting £3bn gap gets filled, is in the same basket. And Cornwall Insight's forecast of a further 16% rise in the price cap from January 2027, taking the typical bill to £1,999, is exactly that — a forecast based on current wholesale prices, not a confirmed figure. Ofgem normally announces the real January cap only in late November, about five weeks before it takes effect, so there's a specific date to watch rather than a vague point later this winter.
Rising costs on two fronts at once, ahead of a Budget that could move a third, isn't something to plan around once the headlines land — it's something to put real numbers against now. That's exactly the exercise our cashflow and budgeting team runs with clients before a cost shock becomes a cash flow problem, not after.