What Happens If You Can’t Pay Business Energy Bills?
Is your business struggling with rising energy costs? You’re not alone. The ongoing energy crisis is putting significant pressure on companies across the UK.
Unlike residential customers, businesses don’t have the protection of Ofgem’s price cap, which can be particularly challenging for small and medium-sized enterprises (SMEs). This situation has been further exacerbated by the conclusion of the Energy Bill Discount Scheme in March 2024, removing a source of financial relief that many businesses had relied upon.
If you’re struggling to pay your bills, here’s what could happen:
Your supplier will contact you. They’ll typically try to understand your situation and set up a manageable payment plan.
Financial penalties: Late fees and interest charges can snowball, making things worse.
Damaged credit rating: Consistent late payments or defaults will hurt your ability to get future loans or good deals with suppliers.
Disconnection risk: Don’t ignore the issue – suppliers can disconnect your business’s energy relatively quickly, sometimes within 30 days of missed payments.
Remember, early communication with your supplier is key to preventing escalation and exploring potential solutions.
How Can I Negotiate Payment Terms with My Energy Supplier?
If you’re in arrears or realise you won’t be able to pay an upcoming bill, your first and most important step is to contact your energy supplier immediately. Don’t wait for them to reach out to you; proactive communication demonstrates your commitment to resolving the issue.
When you contact your supplier, be prepared with the following:
A clear and honest explanation of your situation
Your account details and recent bills
An overview of your current financial position
A realistic proposal for a payment plan, if possible
Your supplier may be open to negotiating more manageable terms, such as spreading the cost of your arrears over a longer period or temporarily reducing your payments.
Remember, it’s in their interest to help you manage your debt and continue as a customer.
What Options Are Available If Our Business Cannot Afford its Energy Bills?
When you genuinely can’t pay, you have four options:
(1) Get a Business Energy Payment Plan
Most energy suppliers are willing to work with businesses to create payment plans that are affordable. To get started, contact your supplier’s payment arrears department.
(2) Get an Energy Efficiency Grant
Taking advantage of grants available to green your business and make it more energy efficient is a great way to save money on your energy bills in the long run. There are currently over £5 billion worth of grants available to UK businesses of all sizes, so it’s worth checking to see if you’re eligible.
In some cases, exploring alternative financing options like short-term business loans or invoice factoring can help bridge a temporary cash-flow gap related to high energy bills. This can provide breathing room while you implement cost-saving measures or negotiate a payment plan with your supplier.
Remember, it’s crucial to carefully assess the terms and interest rates of any alternative financing solution.
(4) Get Business Debt Advice
If you cannot afford the instalments on your energy plan, or your supplier won’t offer that to you because of your credit history, you’ll need to take business debt advice from an experienced insolvency practitioner such as ourselves.
This doesn’t necessarily mean the company will be closed down. There are restructuring options such as administration or a company voluntary arrangement that would mean protection from creditor threats for the duration. Speak with us to learn more about options via a free, no-obligation conversation.
What are the Disconnection Rules for Gas and Electricity for Businesses?
If your UK business faces the risk of gas or electricity disconnection due to unpaid bills, here’s a concise guide to the disconnection rules:
You’ll Get Reminders: Expect reminder notices and final demands alerting you to outstanding debts.
You’ll Receive a Formal Warning: A formal warning will be issued if payment issues are not resolved, indicating potential disconnection.
A Final Notice Will Be Sent: This notice provides a final payment deadline to avoid disconnection.
Legal Steps Are Required for Disconnection: Suppliers must obtain a court warrant to proceed with disconnection legally.
Winter Disconnection Is Prohibited for Vulnerable Businesses: Disconnection is not allowed during winter (October to March) for small businesses considered vulnerable.
It’s worth noting that the exact process may vary slightly depending on the supplier and the specific circumstances of the business, but the above steps provide a general framework that all suppliers are expected to follow.
Rescuing a Company that Can’t Pay Energy Bills
For businesses grappling with energy bills they can’t afford, here are two formal rescue and restructuring pathways that could offer a lifeline, allowing the company to recover and potentially avoid liquidation.
Company Voluntary Arrangement (CVA)
What It Is: A CVA is a legally binding agreement between your business and its creditors to repay a portion of its debts over a specified period.
How It Helps: It allows your company to continue operating while paying off debts in a more manageable way. The terms often involve reduced payments and can sometimes include writing off a portion of the debt.
Process: To initiate a CVA, you’ll need to work with an insolvency practitioner (IP) who will draft a proposal for your creditors. This proposal requires approval from creditors representing at least 75% (by debt value) of those voting on the proposal.
Administration
What It Is: Administration provides a company with protection from its creditors while a plan is developed to restructure or repay debts, or to sell the business to repay debts.
How It Helps: The aim is to rescue the company as a going concern, or at least achieve a better outcome for creditors than would be possible if the company were immediately wound up.
Process: An administrator (an IP) is appointed to take control of the company. The administrator’s role includes making operational decisions, exploring restructuring options, or finding a buyer for the business or its assets.
Both options require careful consideration and professional advice, as they can have significant implications for the future of the business and its directors. It’s essential to consult with an insolvency practitioner such as ourselves early.
If your Business Cannot pay its Energy bills and Needs to Close Down or Liquidate
If your UK business cannot manage its energy bills and there’s no way to recover, a Creditors’ Voluntary Liquidation (CVL) is a formal process to close down the business responsibly.
Here’s a straightforward breakdown of the CVL process:
Agree on Insolvency: The first step is for all directors to acknowledge the business can’t pay its debts and is insolvent.
Appoint an Expert: An insolvency practitioner (IP) is appointed to manage the liquidation process.
Inform Creditors: Creditors are notified about the decision to enter CVL and the forthcoming steps.
Sell Company Assets: The IP sells the company’s assets to raise funds.
Pay Debts: Money from the sale is used to pay creditors, following a legal order of priority.
Dissolve the Business: Once debts have been addressed, the company is formally dissolved.
This process allows for an orderly wind-down, ensuring creditors are treated as fairly as possible.
FAQs on “Can’t Afford to Pay Your Business Energy Bills”
Can I switch energy providers to reduce costs if I owe money to my current provider?
Typically, you cannot switch providers if you have outstanding debts with your current supplier that are over 28 days due. However, it’s worth discussing the situation with both your current and potential new suppliers, as exceptions can sometimes be made under specific circumstances.
What happens if I simply stop paying my business energy bills?
Failing to pay your energy bills can lead to serious consequences, including the possibility of disconnection. Your energy provider might also take legal action to recover the debts, which could affect your business’s credit rating and ability to secure future contracts or services.
Is It Possible to Get a Payment Holiday for Business Energy Bills?
Yes, obtaining a payment holiday for business energy bills is possible under certain circumstances, but it largely depends on your supplier’s policies. A payment holiday allows a temporary pause on payments to help businesses manage through financial difficulties, but it’s not a standard offering and requires negotiation.
References
The primary sources for this article are listed below, including the relevant laws and Acts which provide their legal basis.
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