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What does the Labour ‘price freeze’ mean for my contract?

In the latest in our series of questions to the boss, we focus on the commonly asked question of:

“What does the Labour ‘price freeze’ mean for my contract?”

Business Juice:

Simply put, in my opinion, it means and will mean nothing at all for a business energy contract.

Indeed it’s extremely doubtful whether it will have any direct impact on domestic contracts either.

The truth is Ed Miliband’s price freeze announcement was pure rhetoric and unusually for the utterings from a politician this one was believed and caught a life of its own.

The fact is though that it will not happen, because it cannot happen and in truth it should not happen.

On the face of it for the average consumer it looks a great idea but the benefits are limited and the consequences severe.

Labour’s Price Freeze Proposal

Labour has called for an immediate, and centralized freezing of prices for all domestic customers for a period of time probably two years.

No reference to or mention has been made of the business market.

If it happened what would it mean?

I won’t go into details here but you can compare the business to the domestic market in our guide, but suffice to say that the two markets operate completely differently and any price freeze, in reality unworkable in the domestic market is a total non-starter in the business market.

Why? In the business market contracts are individually priced based on:

  • Region
  • Metering System
  • Business Type
  • Credit Score

As a result there are a myriad of bespoke prices. It would therefore be impossible to set a ‘frozen’ price that didn’t seriously disadvantage the vast majority of businesses.

The consequence of ‘frozen’ energy prices for businesses is therefore an extremely unpleasant one.

In my opinion the consequence for domestic customers wouldn’t be great either as simple economics, and experience of centralized decision making strongly suggests that the ‘frozen’ price can only ever be set at a higher level than it is at today.

The pros and cons for the price


  • Prices will be frozen, and will not change over the period at least providing ‘certainty’ for domestic customers


  • The price will be set at a higher level than is currently the case for many customers
  • The proposal is not a ‘capped’ deal so although prices will not increase over the period they will also not fall either

Why it will not happen

Having said all this the fact is that the proposal will not actually happen.

As an opposition party the opportunity is there to make commitments that one knows you will never have to actually deliver. Despite the strong words, this is one of those cases.


State intervention sends the wrong message to all businesses

  • An incoming administration, of whatever political hue will not want to be seen as the enemy of business. State intervention in a business of any size will strike fear into every other business, regardless of shape, size and industry.

Withdrawal of foreign owned suppliers

  • 4 of the Big 6 energy suppliers are foreign owned; any action by Labour to freeze prices would have the potential of prompting withdrawal resulting in innumerable job losses.

Closed for business

  • The impact of withdrawal would signal that the UK is no longer open for business and inward investment, no new administration would want to project such a picture given its economically catastrophic consequence.

The energy market is a market

  • The reality is the energy market is exactly that, a market. Wholesale energy is traded across national boundaries, setting a non market based price in an active market means significant subsidy will be required from somewhere. The market, and therefore the cost of energy isn’t going to simply move in line with political will no matter how well intended. This policy would cost money and taxpayers will ultimately pay.

The energy cost is only a proportion of the price

  • The wholesale energy cost is only 50% of the price; the remainder funds the running and renewal of the networks, green subsidies and the development of future generation. Freezing prices means squeezing this spending which means a less stable system, more blackouts and less new green energy. No new administration is going to want to be responsible for a new era ‘3 day week’ with energy rationing the watchword or to fail to meet its emission reduction obligations.

What should your business do?

Firstly, and flippantly, we all know never to believe a politician, and especially an opposition one with no prospect of following through their outlandish claims.

Secondly, and more seriously, engagement in the market is key, whether you are a domestic or business customer there is no substitute for accessing the market and getting the best deal you can.

What would be the worst possible thing to do is to sit out the market and wait for it to solve itself around you. Quite simply it won’t.

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