Prime Minister Andy Burnham’s government is facing mounting pressure from two of Britain’s largest industry organisations to significantly reduce green levies on corporate energy bills and accelerate support for energy-intensive sectors. The Confederation of British Industry (CBI) and Energy UK today published a joint report, asserting that making business energy costs an “immediate priority” is essential to revitalise the UK economy and gain the confidence of a cautious private sector.
The report highlights that corporate electricity prices in Britain are currently 45 per cent higher than the average across G7 nations. This disparity is forcing a significant number of businesses, with as many as four in ten firms, to scale back investment plans as they grapple with escalating energy bills. While the UK’s reliance on volatile oil and gas markets contributes to these high costs, approximately one-fifth of a standard business’s electricity bill now comprises 'policy costs' – government-imposed charges designed to fund net-zero initiatives.
As part of their “blueprint for growth”, the CBI proposes two main solutions: either transferring these policy costs into general taxation or funding them through a new, privately financed Energy Transition Funding Scheme. Louise Hellem, chief economist at the CBI, stated that placing these costs directly onto electricity bills has resulted in UK businesses facing “some of the highest electricity costs among the world’s biggest economies.” She emphasised that “reliable, affordable energy is essential for all businesses,” advocating for a comprehensive reform of the energy system to make electrification more practical and affordable.
Developed in collaboration with energy consultancy Cornwall Insights, the blueprint suggests that these reforms could inject an estimated £130 billion into the UK’s economy. Beyond cost shifting, other recommendations include implementing programmes to help companies accelerate their electrification efforts and expanding and expediting support for energy-intensive industries. The Bank of England continues to monitor inflationary pressures, and high energy costs for businesses could impact consumer prices and the overall economic outlook, potentially influencing future interest rate decisions.
While the government has already announced measures to mitigate the impact of high electricity prices on energy-intensive businesses, offering a roughly 25 per cent discount to around 10,000 manufacturers in sectors such as steel and carmaking, the timing of this intervention has drawn criticism. Business Secretary Peter Kyle confirmed the government’s commitment to supporting businesses, but the scheme is not set to be introduced until April 2027. This delay has prompted calls from prominent business figures, including British Chambers of Commerce president Andy Haldane, alongside the CBI and Energy UK, for ministers to bring forward the implementation date.