The UK's economic growth prospects will remain out of reach unless the government takes immediate action to reduce business energy costs, according to a stark new report from the Confederation of British Industry (CBI) and Energy UK. Published today, the blueprint for growth, which includes analysis from Cornwall Insight and the National Institute of Economic and Social Research (NIESR), has been delivered directly to the incoming Prime Minister, urging them to make energy affordability a top priority.
The report highlights that high energy costs are no longer merely an issue for the energy market but act as a significant drag on productivity and competitiveness across the entire economy. It points out that UK electricity prices are currently 45% higher than the G7 median, putting British firms at a disadvantage against international rivals. Furthermore, the report reveals that four in ten companies are already reducing investment due to the burden of high energy bills. Despite some government support for energy-intensive industries, 2.7 million businesses – representing 90% of non-domestic electricity consumption – are grappling with substantial increases to their operational costs.
To address this critical challenge, the CBI and Energy UK are advocating for a comprehensive national strategy developed in collaboration with industry. The blueprint, formulated with input from a taskforce of industry leaders from companies including BT, Centrica, DHL, EDF, E.ON, HSBC, Jaguar Land Rover, KPMG, SSE, and Tesco, outlines practical reforms that could be implemented as early as this year. If fully adopted, these recommendations are projected to inject an additional £130 billion into the UK economy between 2027 and 2050.
Key proposals include direct measures to cut electricity prices, such as removing Renewables Obligation (RO) and Feed-in Tariff (FiT) costs from all business electricity bills. These costs could be financed through general taxation, a publicly funded Energy Transition Funding Scheme, or a privately financed scheme developed with the financial services sector. The report also calls for a reform of business energy taxes by removing Climate Change Levy charges from non-domestic electricity.
Further recommendations focus on broader energy system reforms, including utilising the Reformed National Pricing (RNP) programme to reduce balancing costs and raising non-domestic Minimum Energy Efficiency Standards. The blueprint also stresses the importance of supporting business electrification and energy demand management, proposing a new Business Energy Upgrade scheme for Small and Medium-sized Enterprises (SMEs), targeted operational expenditure discounts to incentivise electrification, and guarantees for corporate Power Purchase Agreements to stimulate market expansion.
Louise Hellem, Chief Economist at the CBI, emphasised the urgency, stating, “Years of loading policy costs onto electricity bills have left UK businesses facing some of the highest electricity costs among the world’s biggest economies. With a new Prime Minister coming into office, it’s clear that reducing business energy costs must be a day-one priority. If we want to tackle the cost of living and invest in public services, we need stronger economic growth – and that can’t happen while firms are navigating sky-high energy bills.” Dhara Vyas, Chief Executive of Energy UK, echoed this sentiment, highlighting that the UK cannot afford to let high energy costs continue to damage business investment and international competitiveness.