Incoming Prime Minister Andy Burnham has been told to take urgent action on business energy prices with industry warning that Britain cannot rebuild its economy, while electricity remains among the most expensive in the developed world.
A report from the CBI and Energy UK says high power costs are weakening investment, productivity and international competitiveness across the economy.
Our business electricity prices were 45% above the G7 median across 2023 and 2024 while gas prices remained close to the middle of the pack, said the report.
More than four in 10 companies surveyed by the CBI in April said high energy costs were forcing them to cut investment.
Current support schemes focus mainly on selected energy-intensive industries and priority growth sectors.
The report says 2.7 million companies receive no relief while businesses outside the schemes account for nearly 90% of non-domestic electricity consumption.
It warns: “Reindustrialisation cannot happen on the back of some of the most expensive electricity in the developed world. If the UK wants to rebuild its manufacturing base and compete for the next generation of industries, from clean tech to advanced materials, affordable, reliable power is a precondition, not a ‘nice to have’.”
RO scrapped
The first test for Burnham would come in the Autumn Budget. The report calls for Renewables Obligation and Feed-in Tariff costs to be removed from every business electricity bill alongside the electricity element of the Climate Change Levy.
The changes should be announced in the Budget and take effect from April 2027. They could be funded through general taxation, a publicly backed Energy Transition Funding Scheme or private finance developed with the financial services sector.
Removing the two renewable policy costs would cost an average of £4.8 billion a year between 2027/28 and 2030/31. Scrapping the electricity element of the Climate Change Levy would cost a further £632 million a year on average.
The package could reduce electricity prices by around £40 to £45 per MWh for most businesses. Cornwall Insight’s business models suggest electricity bills could fall by between 12% and 20% with total energy costs dropping by between 7% and 20%.
NIESR modelling estimates the intervention could generate £7.3 billion of additional economic output, £4.2 billion of private investment and £2.7 billion of tax revenue between 2027/28 and 2030/31. The modelling assumes the cost is covered through general taxation.
Pricing reform
The blueprint goes beyond removing levies. It calls for reforms to electricity pricing and grid operations which could reduce balancing costs by between £1 billion and £2 billion in most years from 2026 to 2035.
Those changes could save businesses a further £4 to £8 per MWh. However the report acknowledges they may limit future bill increases rather than push prices below current levels because balancing costs are forecast to rise.
Energy efficiency rules should also be strengthened with rented commercial buildings required to reach EPC B by 2031. The CBI and Energy UK want the rules extended from buildings larger than 1,000 square metres to those above 100 square metres which would cover nearly half of commercial properties and 95% of floor space.
Help for SMEs
A proposed Business Energy Upgrade scheme would provide advice, low-cost finance and support for SMEs investing in solar panels, batteries, heat pumps and efficiency measures. The report calls for £1 billion over five years from April 2028 which could support around 80,000 businesses and generate £3.3 billion in lifetime savings.
Burnham is also being urged to introduce targeted operating cost discounts for companies switching from gas to electricity. A separate £300 million guarantee programme could support up to 2.5GW of Corporate Power Purchase Agreements and open long-term renewable electricity contracts to smaller businesses.
Extending the economic modelling to 2049/50 suggests the full package could produce £130 billion of additional GDP, £32 billion of private investment and £60 billion of tax revenue.
Analysis was provided by Cornwall Insight and the National Institute of Economic and Social Research.
Copyright © 2026 Energy Live News LtdELN