CFO energy market briefing: UK energy price outlook Q1 2026
- Gary Carter
- 15 hours ago
- 5 min read
Energy costs are hitting the headlines again in the UK. After some good news for short term domestic prices with Ofgem’s latest price cap reduction, the latest headlines are not what business leaders, or domestic consumers for that matter, wanted to see.
Coming into 2026, energy costs remained one of the most persistent financial risks facing UK businesses with already high structural prices set to edge higher through 2026. Now with the latest world events resulting in reduced gas and oil production, we’re set to see more volatility and rising prices far beyond what was forecast just a month ago.
While domestic energy prices had been easing slightly in the short term, structural changes in the UK energy system mean regardless of world events, business energy costs are likely to remain elevated, even if wholesale prices soften. And of course, the latest situation in the Middle East is set to see energy prices spike in the short term and it remains to be seen what the middle to long term outlook is as a result.
For CFO’s and finance leaders, this raises an important strategic question around whether energy is still being managed as a tactical cost or as a controllable financial risk.
This Q1 briefing summarises the key developments shaping UK business energy costs right now and why many organisations are starting to look beyond energy procurement toward structural energy cost transformation as a way of managing energy price risk and volatility and how this can even shape up to become a competitive advantage.
There is ever more reason right now to be thinking outside the box about how to control energy costs. There is ample opportunity to do this which we explore in our Q1 energy market briefing, which has links to further reading on the issues discussed and ideas to tackle them.
1. Global energy volatility remains a key risk driver
Energy markets remain highly sensitive to geopolitical events.
Recent global tensions in the Middle East have again pushed fossil fuel markets higher, reinforcing the vulnerability of economies dependent on imported energy. Analysts warn that energy price shocks linked to geopolitical events are likely to remain a structural feature of global markets.
Global gas prices have spiked since the start of the latest Middle East crisis due to reduced global supply which has already fed through to wholesale energy prices in the UK which are up around 50% since the crisis began.
The last major example was the 2022 Ukraine crisis, which triggered a historic spike in European energy prices and reshaped energy cost structures across the continent.
The consequences are still being felt today. UK electricity prices remain significantly elevated compared to pre-2022 levels, with industry groups reporting that electricity prices are around 70% higher and gas around 60% higher than before the Ukraine war.
For finance leaders, the key takeaway is simple:
Energy prices have not returned to the structural baseline that businesses operated under prior to 2022.
It’s likely that the UK will continue to be adversely affected by global events such as these due to our reliance on imported energy. There is no single solution to this problem but the general principle of reducing the amount of energy we need to use is the closest idea we have to a silver bullet that any energy intensive company has at its disposal.
2. Domestic price reductions do not translate to business relief
In early 2026, attention has focused on falling household energy costs.
However, business energy pricing works very differently from domestic markets.
Most businesses purchase energy through fixed or flexible contracts linked to wholesale markets and third-party costs rather than regulated price caps.
Even when wholesale prices soften, other components of business energy bills can increase. These include:
network charges
system balancing costs
policy levies
infrastructure investment costs
These non-commodity costs are now estimated to make up nearly 60% of a typical business electricity bill.
This is one reason many businesses experience rising energy costs even when market headlines suggest prices are falling.
3. Network charges are rising sharply in 2026
One of the biggest drivers of higher business energy costs this year is the increase in Transmission Network Use of System (TNUoS) charges.
These charges fund the national high-voltage electricity grid.
From April 2026:
TNUoS tariffs are expected to rise by around 60–64% year-on-year.
In some projections, overall transmission charges could increase by as much as 94%.
This increase reflects major investment in the UK electricity grid as the country transitions to a low-carbon energy system.
In practice, this means businesses may see higher electricity bills even if their wholesale electricity price stays the same.
Standing charges are also expected to increase significantly as these network costs are passed through to customers.
4. Infrastructure investment and policy costs are increasing
The UK energy system is undergoing its largest infrastructure transformation since the 1960s. Major
investments include:
expanding the electricity transmission network
integrating large volumes of renewable generation
building new nuclear capacity
upgrading grid resilience
For example, the Sizewell C nuclear project is expected to add additional electricity levies to many business bills, potentially increasing costs by around 5% for large energy users.
At the same time, constraint costs, payments made when renewable generation cannot be transmitted due to grid limitations, are also rising as the energy system evolves.
These costs are not directly linked to energy consumption but are passed through to consumers via network and system charges.
5. The resulting energy price outlook structurally higher business energy costs
Taken together, these factors are reshaping the structure of UK electricity costs.
Businesses now face:
higher network infrastructure costs
policy levies supporting new generation
volatile global commodity markets
grid balancing and system costs
reduced exposure to regulated pricing protections
For many companies, this means energy costs are becoming structurally embedded in operating margins rather than temporary spikes. In fact, many finance leaders see energy as an uncontrollable fixed overhead they can’t do much about.
6. Why CFO’s are starting to look at energy differently
Historically, energy management in many businesses has focused on procurement:
renegotiating contracts
switching suppliers
chasing better unit rates
But the evolving cost structure of the UK energy system means that procurement alone can no longer control energy risk.
A growing number of organisations are now exploring energy cost transformation strategies, including:
demand reduction and efficiency
on-site generation
energy storage
intelligent load management
strategic energy procurement
These approaches address the structural drivers of energy cost, not just the price of the commodity itself.
Final thought for finance leaders
Energy is increasingly behaving less like a simple utility cost and more like a strategic financial variable.
For CFO’s, this raises an important question:
If energy costs are structurally embedded in the business model, should they still be managed tactically?
Organisations that start treating energy as a strategic lever rather than a procurement exercise are increasingly able to reduce exposure to price volatility, improve cost predictability, and strengthen operational resilience.
In a market where energy costs are unlikely to return to pre-2022 levels any time soon, that shift in thinking may prove to be a competitive advantage.
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