Why action is needed now
High energy costs are one of the biggest barriers to growth facing UK businesses. While firms across the economy continue to grapple with rising labour and operating costs, electricity prices remain a particular challenge, with UK businesses paying around 45% more for electricity than the G7 median.
The CBI and Energy UK have published Cutting Business Energy Costs: A Blueprint to Boost Growth , setting out a comprehensive strategy to reduce electricity costs, support business electrification and strengthen the UK's competitiveness.
The report argues that tackling business energy costs must be viewed as a central component of economic and industrial policy, not simply an energy issue. Analysis undertaken with Cornwall Insight and National Institute for Economic and Social Research (NIESR) suggests that removing key policy costs and taxes from business electricity bills could generate more than £130bn of additional economic output by 2050, while also boosting private investment and tax revenues.
A blueprint for growth
The report sets out a package of recommendations designed to deliver immediate relief while supporting long-term reform of the energy system.
If implemented in full, it is estimated that these recommendations can unlock an additional £130bn in economic activity between 2027 and 2050:
Take direct action to cut electricity prices
Remove Renewables Obligation (RO) and Feed-in Tariff (FiT) costs for all businesses. This should be financed through one of the following options:
- Move the costs into general taxation
- Create a publicly financed Energy Transition Funding Scheme
- Work with the financial services sector to develop a privately financed Energy Transition Funding Scheme.
In addition, reform business energy taxes by taking Climate Change Levy charges off non-domestic electricity.
These actions could cut total energy costs by up to 20%, depending on the type of business, and close the competitiveness gap with international counterparts.
Implement reforms to reduce the cost of the energy system
- Use the Reformed National Pricing (RNP) programme to cut balancing costs
- Raise non-domestic Minimum Energy Efficiency Standards.
Support business electrification and energy demand management
- Launch the Business Energy Upgrade scheme for SMEs
- Offer targeted operational expenditure discounts to incentivize electrification
- Offer guarantees for corporate Power Purchase Agreements to drive market expansion.
Understanding business energy demand
A key feature of the report is its analysis of seven different business energy archetypes, developed with Cornwall Insight and informed by businesses across the economy. The research highlights significant differences in how firms consume energy and demonstrates why a one-size-fits-all approach to policy is unlikely to be effective.
The findings show that while targeted support schemes such as the British Industry Supercharger and British Industrial Competitiveness Scheme provide important relief for eligible firms, many UK businesses remain exposed to rising electricity costs.
Delivering growth through lower energy costs
With high electricity prices continuing to constrain investment across the economy, the CBI and Energy UK are calling on the new incoming Prime Minister and government to work with industry to implement the recommendations set out in the report and deliver a more competitive, resilient and growth-oriented energy system.
For more information, please contact Jonathan Oxley, CBI Senior Manager, Energy Transition.
