How to exit a business energy contract early

The short answer

A business energy contract is a legal agreement, and leaving a fixed term early can trigger an early termination fee. There is no cooling-off period once you have agreed, even if you agreed over the phone, and a verbal agreement is binding. The main ways out without paying are to wait for the end of the term, to leave a contract that has rolled into out-of-contract status, or to show that the contract was sold to you wrongly.

Step 1: read what you actually signed

Before doing anything, find your contract and its Principal Terms, the summary of the key terms every supplier must give. Look for:

• the start and end date;
• whether there is a termination fee and how it is calculated;
• whether your price can change during the term;
• what happens at the end (rollover, out-of-contract or evergreen);
• whether a broker's fee is built into your rates.

Our guide to business energy contract terms to check explains each item. If you cannot find the paperwork, ask the supplier for a copy.

Step 2: check whether you are already free to leave

You may not be locked in. Ofgem's microbusiness rules, in force from 1 October 2022, mean:

• a customer who is out of contract cannot be charged a termination fee;
• suppliers cannot require a microbusiness to give notice to leave, except under an evergreen contract, where up to 30 days' notice can be required (for fixed-term contracts, an earlier Ofgem rule from April 2015 already stopped suppliers requiring microbusinesses to give notice more than 30 days before the end date);
• a supplier may roll a contract over only if it has given the required renewal information, and a rollover cannot exceed 12 months.

If you were rolled over without the correct renewal information, you may have grounds to challenge it. Read rollover contracts and whether a supplier can renew automatically. Citizens Advice also says that suppliers should contact you about three months before the end of a fixed term, and that you can complain if they did not.

Step 3: weigh the fee against the saving

If you are inside a fixed term, the sensible test is simple: does the saving from switching exceed the termination fee plus any new costs? How a termination fee is calculated is set by each supplier's contract terms and differs between suppliers, so ask for the exact figure in writing, together with how it was worked out. While you are inside a fixed term, Ofgem's rules allow your supplier to object to a switch where your contract gives it that right, so a new supplier may not be able to take you on until the fee is settled or the term ends.

Worked example (illustrative figures)

These numbers are invented to show the method, not a typical fee. A shop uses 24,000 kWh of electricity a year, or 2,000 kWh a month. Eight months remain on the contract at 31p/kWh. A new supplier offers 27p/kWh.

• Saving per kWh: 31p − 27p = 4p.
• Usage over the remaining eight months: 2,000 × 8 = 16,000 kWh.
• Saving: 16,000 × £0.04 = £640 over that period.
• If the supplier quotes a termination fee of £450, you would be ahead by £640 − £450 = £190, before checking the new contract's standing charge and term.
• If the fee were £800, you would lose £160 by leaving early, so waiting would be better.

Remember also that a new contract starts a new term and may have its own termination fee. Compare the whole cost, not just the exit, using our business energy cost calculator.

Step 4: ask the supplier

Suppliers would often rather keep a customer than lose one. Ring and say plainly that you are considering leaving, and ask what they can offer. You can ask whether they will waive or reduce a fee, bring the end date forward in return for agreeing a new term, or reprice you. They are not obliged to agree, but asking costs nothing. Our page on negotiating with your supplier has a script and tips. Keep any concession in writing.

Step 5: check how the contract was sold

If a broker or salesperson misled you, you may have a case. Common problems include:

• being told the deal was cheaper than it was;
• a broker fee that was not shown in the Principal Terms when it should have been (rules started on 1 October 2022 for microbusinesses and 1 October 2024 for all non-domestic customers);
• signing a letter of authority that was used for something you did not agree.

Raise it first with the broker, or with the supplier if the supplier's own sales staff were involved. A microbusiness's broker should be signed up to a Qualifying Dispute Settlement Scheme, and small businesses have equivalent protection from 19 December 2024. If a complaint is not resolved you can go to the Energy Ombudsman once you have waited eight weeks or received a deadlock letter, then within 12 months. Ofgem is clear that it does not license brokers and cannot force repayment of commission, so be careful of anyone who offers to claim money back for a fee. See broker mis-selling and what to do if a broker mis-sold your contract.

Other situations that can change things

• You are moving premises. Ask whether the contract can transfer. See taking a contract to new premises.
• You are selling or closing the business. Check the contract and read what happens when a business is sold and closing a business energy account.
• Your supplier fails. Ofgem moves your account to a new supplier. Do not switch away in a rush. See what if my supplier goes bust.
• The supplier changes your price mid-term. Read the contract; see can a supplier change my fixed price.

What not to do

Do not simply stop paying or tell the supplier you are "cancelling" and walk away. The debt stays, you can be charged, and an outstanding balance can hold up a switch. Do not sign a new contract before you know the exit fee on the old one.

Next steps

1. Get the contract, end date and fee in writing.
2. Check whether you are already out of contract or rolled over wrongly.
3. Work out fee versus saving, using your own usage.
4. Ask the supplier to waive or reduce the fee.
5. If you were mis-sold, complain in writing and keep the evidence.

When you are free to move, follow how to switch business energy.