What Are Out-of-Contract Business Energy Rates, And Is Your Business on One?
July 1, 2026
Most business owners pay close attention to their energy contract when they sign it, but what happens after that contract expires? For thousands of UK businesses, the answer is an automatic move onto an out-of-contract rate: a default tariff set by the supplier that’s often considerably higher than the rate they had before. It’s one of the most common, and most avoidable, reasons UK businesses overpay on energy.
This guide explains what out-of-contract rates are, how businesses end up on them, how to check your current status, and what to do if you’re affected.
What Are Out-of-Contract Business Energy Rates?
Out-of-contract rates and deemed rates are both default tariffs your energy supplier charges when your business does not have an active negotiated contract in place. The two terms refer to slightly different situations, which applies depends on your specific circumstances, but the practical result is the same: you’re paying your supplier’s default pricing rather than a negotiated deal.
There are two main scenarios that trigger these rates:
- Your contract expires, and depending on the terms, your supplier will either move you onto a deemed contract or apply a default out-of-contract rate. In both cases, you’re no longer on your negotiated price.
- You move into new premises and start using energy before agreeing a contract with a supplier. You’re placed on deemed rates from day one.
A third related scenario is a rollover contract, where your contract automatically continues on the same terms when it expires because no action was taken before the end date. Ofgem limits rollover contracts for microbusinesses to a maximum of 12 months.
In all of these situations, your business ends up paying more for its energy than it needs to.
Unlike domestic energy, there is no Ofgem price cap protecting business customers. Suppliers set their own out-of-contract and deemed rates, and these can change without much notice.
How Much More Could Out-of-Contract Rates Be Costing You?
Out-of-contract rates are typically much higher than rates available under a negotiated contract, and in the current market the difference can be significant.
To illustrate the gap, here’s a typical range for SME electricity in 2026:
- Contract rate: approximately 22–30p per kWh
- Out-of-contract rate: approximately 32–45p per kWh
Rates vary by supplier, business type, and meter size, but the figures above illustrate the scale of the potential difference.
To put it in practical terms: a business using 20,000 kWh of electricity per year on a fixed rate of 25p pays around £5,000 annually. On an out-of-contract rate of 40p, that same usage would cost £8,000, a difference of £3,000 per year, before factoring in gas.
For larger energy users, or any business that has been on these rates for several months, the cumulative cost can be considerable. Suppliers can also increase out-of-contract rates in response to market conditions, so the longer a business stays on them, the greater the financial exposure.
How Do Businesses End Up on Out-of-Contract Rates?
Most businesses arrive at out-of-contract rates through a combination of long contract cycles, narrow renewal windows, and suppliers that are not always proactive in communicating what happens when a contract ends. The most common routes are:
- A missed renewal window
Many suppliers require advance notice of 30 to 90 days before a contract end date to negotiate a new deal or arrange a switch. For microbusinesses, Ofgem caps this notice period at a maximum of 30 days; for larger businesses, the period is set by the contract terms and can extend to 60 or 90 days. Businesses that miss this window can reach their contract end date without a new contract in place, resulting in a move onto default rates.
- Moving into new premises
A business that starts using gas or electricity at a new address before a supply contract has been agreed will be placed on deemed rates by the existing supplier at that address.
- A supplier exiting the market
If an energy supplier ceases trading, Ofgem will appoint a new supplier to take on its customers through a competitive process. Businesses transferred in this way are placed on a deemed contract with the new supplier, which can be more expensive than a negotiated rate, though there are no exit fees and switching is permitted at any point.
In each case, the sooner the situation is identified and addressed, the less it costs. Knowing how to check your current contract status is therefore the most practical first step, and it takes less time than most businesses expect.
How Do You Know If You’re on an Out-of-Contract Rate Right Now?
There are four practical ways to check, and between them they should give a clear picture of where your business stands.
- Check your contract end date: This should be in your original contract documents or accessible through your supplier’s online account portal. If the end date has passed and no new contract has been signed, it is likely that default rates are now applying.
- Review your current unit rate: This appears on your energy bill. If your rate is noticeably higher than when you last agreed a contract, or higher than you would expect for a negotiated deal, it is worth investigating further.
- Check the tariff description on your bill: Some suppliers label bills clearly as “out-of-contract” or “deemed,” though not all do. If the tariff type is not stated, contacting your supplier directly is the quickest way to confirm.
- Ask a broker to check for you: A business energy broker can verify your contract status, compare your current rate against live market rates, and provide a clear picture of your position.
Once you have a clear understanding of your contract status, moving off an out-of-contract or deemed rate is more straightforward than most businesses expect, and can often be resolved within a matter of weeks.
How to Switch Away from an Out-of-Contract Rate
If you’re on an out-of-contract or deemed rate, there is no exit fee and no notice period required to leave. You can begin the process of securing a new deal straight away.
Approaching individual suppliers directly means negotiating without a clear benchmark and managing the process yourself. Working with Smarter Business, a specialist business energy broker, gives you access to competitive rates across a range of suppliers, clear guidance through your options, and a team that manages the transition from initial comparison through to completed switch.
- Rate comparison across the market:
Smarter Business compares live rates from a range of trusted suppliers and presents your options clearly, factored against your actual usage profile rather than a generic estimate.
- Contract selection and paperwork:
Once you have chosen a deal, the Smarter Business team manages all supplier communications and transfer administration on your behalf.
- A seamless changeover:
There is no interruption to your energy supply during the switch. The transfer is handled in the background, with no action required from you.
Before agreeing to any new contract, it is worth reviewing more than the headline unit rate. Standing charges, contract length, exit clauses, and whether the rate is genuinely fixed or subject to revision will all affect what you actually pay over the term. A Smarter Business advisor will walk through each of these before anything is signed.
Compare Business Energy Rates with Smarter Business
Over the last 15 years, Smarter Business has helped more than 60,000 UK businesses take control of their energy costs, from initial comparison through to ongoing contract management.
Whether you are currently on an out-of-contract rate and looking to switch, approaching a renewal window, or simply want to know whether you are on a competitive deal, the team can compare options from a panel of trusted UK suppliers and manage the process from start to finish.
For expert advice or to compare business energy deals, get in touch with the Smarter Business team today.
Frequently Asked Questions
What is the difference between a deemed rate and an out-of-contract rate?
A deemed contract applies in two situations: when a business moves into new premises and starts using energy before agreeing a contract with a supplier, or when an existing contract expires without specifying what happens at the end of the term. An out-of-contract rate applies when a contract expires and that contract does specify a post-expiry rate. Both result in higher default pricing, and in both cases you can switch supplier without paying exit fees or serving a notice period.
Can my supplier stop me from switching if I’m on an out-of-contract or deemed rate?
No. Your supplier cannot prevent you from switching to a new supplier, nor can they charge you a termination fee. No notice period is required to cancel an out-of-contract or deemed tariff arrangement and begin a switch.
How long does a business energy switch take?
Under Ofgem’s Faster Switching rules, businesses that are out of contract can typically switch to a new supplier within five working days. For businesses still within a fixed-term contract, the switch takes effect on or after the contract end date. In either case, there is no interruption to your energy supply during the transfer.
