- Unlike domestic energy, UK business energy contracts have no cooling-off period once agreed, so a verbal or signed acceptance is generally binding from day one.
- Ofgem rules ban automatic rollover contracts longer than 12 months for micro-business customers and require suppliers to set out renewal terms in writing.
- A micro-business is broadly one using under 100,000 kWh of electricity or 293,000 kWh of gas a year, or with fewer than 10 employees and turnover or balance sheet under 2 million euros.
- Deemed and out-of-contract rates are usually the most expensive tariffs a supplier offers, as they carry no negotiated discount.
- Most fixed business contracts require notice to switch, with renewal or termination windows commonly opening between 30 days and several months before the end date.
UK firms can choose fixed, variable, flexible, deemed or rollover energy contracts. Fixed gives price certainty, flexible suits large users, and deemed or rollover rates are costly defaults. Serve notice in the renewal window to avoid being trapped on higher prices.
Last reviewed: June 2026
Why contract type matters more than the headline rate
When a business shops for gas or electricity, attention usually fixes on the unit rate quoted in pence per kilowatt hour. That number matters, but the type of contract sitting behind it decides how much control a business keeps over its costs, how long it is locked in, and what happens when the agreement ends. Two firms paying the same rate today can end up in very different positions a year later depending on whether they signed a fixed deal, drifted onto a variable tariff, or fell into an automatic rollover.
Business energy in the UK works very differently from domestic supply. There is no price cap for businesses, no standard cooling-off period once a deal is agreed, and no single set of consumer rights that applies to every firm. Instead, the protections depend partly on size, with the strongest rules reserved for micro-business customers. Understanding the main contract types is the first step to avoiding the expensive defaults that catch out unprepared firms.
The five main business energy contract types
Suppliers package energy in a handful of recognisable structures. Each has a place, but each also carries trade-offs that suit some businesses and penalise others.
Fixed-term contracts
A fixed contract locks the unit rate and standing charge for an agreed term, commonly one to five years. The price per unit does not change for the life of the deal, even if wholesale costs rise sharply. This is the most popular choice for small and medium businesses because it makes budgeting predictable and removes the risk of sudden increases. The trade-off is that the rate will not fall either if the wider market drops, and leaving early usually triggers exit fees or termination charges. Fixed contracts almost always carry a defined notice window, and missing it is the single most common way businesses end up rolled over.
Variable contracts
On a variable tariff the unit rate moves in line with the wholesale market and the supplier's pricing decisions. When wholesale prices fall, bills can drop without any action. When they rise, costs climb just as quickly. Variable deals usually offer more flexibility to switch, often with shorter notice or no exit penalty, which can suit a business expecting to move premises or one that wants to wait for fixed rates to settle. The downside is exposure: a business on a variable rate carries the full risk of market volatility, which makes cash-flow planning harder.
Flexible contracts
Flexible purchasing, sometimes called a flex contract, is aimed at larger energy users rather than typical small firms. Instead of buying all of their energy at one fixed price, the business buys it in tranches over time, often through a broker or a managed service, trying to average down the cost across the contract period. This can deliver savings for high-volume sites with the resources to monitor the market, but it requires active management and accepts that some volume may be bought when prices are high. Flexible contracts are generally unsuitable for businesses with modest consumption, who gain little from the complexity.
Deemed contracts
A deemed contract applies when a business uses energy at a property without having agreed a contract with the supplier, most often after moving into new premises where supply simply continues. Deemed rates are set by the supplier and are typically among the highest available, because there is no negotiated agreement. There is no fixed term and no exit fee, so a business on deemed rates is free to negotiate a proper contract at any time and should do so quickly to stop overpaying.
Rollover contracts
A rollover, or automatic renewal, happens when a fixed contract ends and the business has not arranged a new deal or given notice. The supplier rolls the account onto a new contract, often on less competitive terms and sometimes for a further fixed period. For micro-businesses, Ofgem rules limit how long an automatic rollover can run and require suppliers to make renewal terms clear, but the rolled rates are still rarely the cheapest on offer. Avoiding rollover is one of the main reasons to track contract end dates carefully.
| Contract type | Main pros | Main cons | Typical length | Exit fee risk |
|---|---|---|---|---|
| Fixed | Price certainty, easy budgeting | No benefit if market falls, notice window required | 1 to 5 years | High if leaving early |
| Variable | Flexibility, benefits if prices fall | Full exposure to price rises | Often open-ended or short | Low to none |
| Flexible (flex) | Potential savings for large users | Needs active management, complex | 1 to 3 years plus | Varies by agreement |
| Deemed | No tie-in, leave anytime | Among the highest rates | No fixed term | None |
| Rollover | Continuity of supply | Often uncompetitive, can lock in a fresh term | Up to 12 months for micro-business | Possible if fixed term applied |
Notice periods and exit fees
Almost every fixed business energy contract sets out a notice or termination window. This is the period before the contract end date in which the business must tell the supplier it intends to switch or renegotiate. Historically these windows could be long and easy to miss, which is exactly how rollovers happened. Current Ofgem rules require suppliers to be clearer with micro-businesses, and many now accept termination notice at any point during the contract, with the switch taking effect at the end date. Even so, the practical advice is the same: note the contract end date, find the supplier's stated notice requirement, and serve written notice in good time rather than leaving it to the last week.
Exit fees apply when a business breaks a fixed contract early. The charge usually reflects the cost the supplier expects to bear from buying energy it can no longer sell to that customer, so it can be significant on a long fixed term. Variable and deemed arrangements rarely carry exit fees, which is part of their appeal for businesses that need to stay nimble. Before signing any fixed deal, a business should ask for the exit terms in writing and check whether they are a flat fee, a per-unit charge, or based on the remaining contract value.
What automatic rollover means legally
An automatic rollover is a contractual mechanism, not an accident. By accepting the original contract, the customer typically agrees to terms that allow the supplier to renew the agreement if no notice is given. For micro-businesses, the law and Ofgem's licence conditions place limits on how this can work. Suppliers must publish their principal contractual terms, set out renewal arrangements clearly, and cannot roll a micro-business onto a new fixed contract of more than 12 months. Suppliers are also expected to make it straightforward for a micro-business to terminate and to give clear information about the rates that will apply. These protections do not exist for larger businesses, which are expected to negotiate on their own account.
How to avoid the rollover trap
The rollover trap is avoidable with a small amount of admin discipline. The core steps are simple but easy to neglect when a business is busy.
- Record the exact contract end date and the notice window in a shared calendar the moment a contract is signed.
- Start reviewing the market several months before the end date, not in the final fortnight.
- Serve written termination notice within the supplier's stated window, keeping a dated copy.
- Confirm in writing that the supplier has acknowledged the notice.
- Line up a new contract or switch to complete on the day the old one ends, so supply never lapses onto deemed or rolled rates.
Businesses that use a broker should still keep their own record of dates, because responsibility for the contract ultimately sits with the business, not the intermediary. Comparing quotes from more than one source and reading the renewal terms carefully are the most reliable defences against drifting onto a poor rate.
Ofgem micro-business protections in summary
Micro-business status unlocks a specific set of safeguards under Ofgem's standards of conduct and supply licence conditions. These include clearer pre-contract information, a ban on rollover contracts longer than 12 months, the right to terminate without unreasonable obstruction, and access to the Energy Ombudsman if a complaint is not resolved within the supplier's timescales. A business should check whether it meets the micro-business thresholds, because if it does, it is entitled to rely on these rules when challenging a renewal or disputed charge. Larger businesses fall outside this regime and should rely instead on careful contract review and, where used, broker oversight.
Frequently Asked Questions
What is an automatic rollover contract?
An automatic rollover contract is one that renews itself when the original fixed term ends and the customer has not given notice or signed a new deal. The supplier continues supply on new terms it sets, which are often less competitive than freshly negotiated rates. For micro-businesses, any rollover fixed term cannot exceed 12 months under Ofgem rules.
How much notice do I need to give?
The notice period is set out in the contract and varies by supplier. Many suppliers now allow micro-businesses to give termination notice at any point during the contract, with the switch completing at the end date, while others specify a fixed window before the end date. Always check the contract terms and serve written notice well ahead of the deadline.
What is a flexible energy contract?
A flexible, or flex, contract lets a business buy its energy in tranches over the contract period rather than at a single fixed price, aiming to average down the cost. It suits large energy users with the resources to track the wholesale market, but it requires active management and is generally not worthwhile for small firms with modest consumption.
Are rollover contracts legal?
Yes, rollover contracts are legal in the UK. For micro-businesses, however, Ofgem rules restrict them: suppliers must set out renewal terms clearly and cannot roll a micro-business onto a fixed contract longer than 12 months. Larger businesses have fewer protections and are expected to manage their own renewals.
What happens if I go out of contract?
If a contract ends without a new deal in place, the supplier moves the business onto out-of-contract or deemed rates. These are typically the most expensive tariffs available, because they carry no negotiated discount. There is usually no tie-in, so the business is free to negotiate a new contract straight away to stop overpaying.
