If you have just moved into a new business premises and your first energy bill seems eye-watering, you are almost certainly on a deemed contract. This guide explains what deemed contracts are, why they exist, why they are so expensive, and the fastest way out.
What is a deemed contract?
When a UK business takes occupation of a premises, the gas and electricity supply is automatically continued by the existing supplier on a “deemed” tariff — deemed because no formal contract has been signed yet. The legal basis is the Gas Act 1986 and Electricity Act 1989, which require continuity of supply.
Why are deemed rates so expensive?
Suppliers price deemed contracts for the worst case — an unknown customer with no credit history, a short-stay risk and zero relationship value. Three drivers:
- Credit risk: no signed contract, no direct debit, possibly no creditworthiness check.
- Admin overhead: deemed customers churn frequently and require manual onboarding.
- Recovery economics: deemed customers often dispute first bill, request refunds or go silent.
The result: deemed unit rates of 35-50p/kWh and standing charges of £1-2/day are common in 2026 even when the same supplier’s contracted tariffs sit at 25-30p/kWh.
How do you end up on a deemed contract?
Common scenarios:
- You took on a new business premises and assumed the previous tenant’s contract continues (it does not).
- Your previous supplier closed your contract because you moved out and the new supply at your address rolled to deemed.
- You let your fixed contract expire without signing a new one and the supplier rolled you to deemed (sometimes called “out-of-contract” rather than deemed; commercially equivalent).
- You are a new business and never signed a contract.
How to switch off a deemed contract
Two routes:
Route 1: Sign a contract with your current supplier
Phone the supplier and request to move from deemed to a contracted tariff. Switch is immediate. You will get the supplier’s standard contracted rate, which is usually 30-40% cheaper than deemed but still not market-leading.
Route 2: Switch supplier (recommended)
Run a comparison and switch to the cheapest market option. You can switch off a deemed contract at any time with 28 days notice — no exit fees. The change-of-supplier process takes 21 days from new contract signature.
How much can you save by switching off deemed?
For a 25,000 kWh/year business currently on deemed at 45p/kWh, switching to a market-rate fixed contract at 27p/kWh saves £4,500/year on unit rate alone. Standing charge savings typically add another £200-400.
Avoiding deemed contracts in the first place
- If moving into a new premises: Identify the existing supplier (the meter helpline or the previous tenant can tell you). Within 28 days, sign a contracted tariff with them or switch to a new supplier.
- If renewing a contract: Diary the renewal date 6 months ahead. Sign the new contract before the old one expires.
- If acquiring a business: Add energy contracts to the due diligence checklist; resolve before completion.
Frequently Asked Questions
Typically 50-80% more expensive on the unit rate. For a small business using 25,000 kWh/year, the gap can be £3,000-5,000 per year.
Yes — deemed contracts have no fixed term, so you can switch supplier at any time with 28 days notice. There are no exit fees.
Once you sign the new contract, change of supplier completes in 21 days from signature. The 28-day notice period to your existing deemed supplier runs concurrently.
Commercially very similar — both are non-negotiated default tariffs at punitive rates. Strictly, “deemed” applies to a customer who has never signed a contract; “out-of-contract” applies to a customer whose fixed contract has expired without renewal. Both can be exited at any time with 28 days notice.
Generally no — the deemed-rate price is the agreed price under the supply continuation rules, even if you did not actively agree to it. The remedy is to switch off as fast as possible, not to backdate a refund.
Stuck on a deemed contract? Get a free 60-second business energy quote — switching usually saves 30-50% on your bill within 21 days.
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