Labour under pressure as Middle East crisis threatens fresh surge in business energy bills

Labour ministers are facing mounting pressure after businesses warned that thousands of companies could soon be forced into costly new energy contracts as global prices spike.

Energy Secretary Ed Miliband held emergency discussions with industry leaders and business groups on Thursday after fears grew that the Government has little plan to shield firms from rising costs triggered by the conflict in the Middle East.

During the meetings, representatives from Britain’s largest business organisations warned that around a third of companies are due to renew their energy contracts in April. With wholesale prices climbing sharply, many firms now risk locking themselves into expensive deals for years.

Unlike households, businesses do not benefit from the energy price cap that limits how much suppliers can charge. Companies also tend to sign long-term contracts, often lasting up to five years, leaving them exposed to prolonged periods of high prices.

Business leaders said the timing could not be worse. Many companies are already struggling with higher taxes and mounting regulatory costs under Labour’s economic agenda, raising fears that rising energy bills could deliver yet another blow.

The warning came as energy markets surged again on Thursday. Oil prices climbed above $100 a barrel following escalating tensions in the Gulf, after Iran intensified attacks on cargo ships and its new supreme leader vowed to continue blocking the vital Strait of Hormuz shipping route.

Natural gas prices, which heavily influence the cost of electricity in the UK, have also soared. Since the conflict in Iran began, gas prices have risen by around 60 per cent.

Despite the growing alarm, Thursday’s meeting was widely described by participants as little more than a “listening exercise”, with few signs the Government has any concrete plan to help companies facing the latest surge in costs.

Mr Miliband was reportedly focused on cracking down on alleged profiteering in the energy supply chain, particularly among brokers and transport firms that ministers suspect may be exploiting the volatile market.

The talks included representatives from the so-called B5 group, which brings together five of the UK’s largest business organisations: the British Chambers of Commerce, the Confederation of British Industry, the Federation of Small Businesses, the Institute of Directors and Make UK.

Together they represent a vast proportion of British companies, many of which are already bracing for steep increases in energy bills.

Small firms appear particularly vulnerable. The Federation of Small Businesses has warned that a typical small company could see standing charges jump by around 40 per cent from April, pushing average energy costs above £5,000 a year.

The organisation has urged ministers to remove green levies from business energy bills, arguing that companies should receive similar relief to households.

Mr Miliband also met separately with major gas and electricity suppliers, who warned that many households may struggle when bills are expected to rise again in July once the current energy price cap period ends.

Energy companies urged ministers to consider support schemes, including targeted subsidies or discounted tariffs for vulnerable households, warning that swift action would be needed if prices continue climbing.

However, the Energy Secretary offered little in the way of detail, repeating only the Government’s vague pledge to do “everything in our power” to protect households and businesses.

Officials are wary of repeating the blanket subsidy programme introduced during the 2022 energy crisis, which cost taxpayers roughly £44 billion.

Meanwhile Chancellor Rachel Reeves has attempted to shift attention onto petrol retailers, promising to publicly name companies that impose what she described as “unjustifiable” fuel price increases.

She has already written to regulators urging them to take action against suspected profiteering and encouraged motorists to use the Government’s fuel price comparison website.

“I will not tolerate companies exploiting the current situation to make excess profits at the expense of consumers,” Ms Reeves said.

But critics say the Government is ignoring the bigger issue: rising global energy costs combined with domestic policies that are pushing bills higher.

The Conservatives have renewed calls for the Chancellor to scrap a planned increase in fuel duty due in September.

Richard Holden, the shadow transport secretary, accused Ms Reeves of distorting the evidence after she suggested that cutting fuel duty would not necessarily benefit motorists.

Her claim appears to contradict findings from the Competition and Markets Authority, which previously concluded that fuel duty reductions were largely passed on to drivers.

“Rachel Reeves is trying to rewrite the facts,” Mr Holden said. “The evidence shows that fuel duty cuts do reach motorists.

“With global events already pushing prices up, the last thing drivers need is Labour piling on another tax.”

He added that Conservative governments froze fuel duty every year they were in office, while Labour had chosen instead to raise taxes on motorists.

Despite the growing concerns from businesses and households, ministers insist they are monitoring the situation closely.

Following Thursday’s meetings, Mr Miliband said the Government would continue discussions with the energy sector in the coming weeks as the situation develops.