Energy costs an ‘anchor’ on productivity and competitiveness
A new joint report from the CBI and Energy UK, has called on the UK government to cut business energy costs, arguing that doing so would deliver a £130 billion boost to the economy by 2050. The research, which includes analysis from Cornwall Insight and the National Institute of Economic and Social Research (NIESR), also provides a blueprint for growth for the new Prime Minister, Andy Burnham.
According to the report, persistently high energy costs are no longer just an energy market problem for the UK, rather they are an anchor weighing down productivity and competitiveness across the whole economy. The research notes that while UK gas prices sit close to the G7 median, electricity prices are around 45% higher, putting UK firms at a competitive disadvantage. This, they claim, makes UK electricity disproportionately expensive, discourages investment, and undermines the competitiveness of energy-intensive industries.
Louise Hellem, Chief Economist at the CBI, said “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.”[i]
CBI and Energy UK Reference a PwC investor survey conducted in March 2026 which found that roughly half of respondents see the cost of electricity as a key area for improvement in the UK. Further, CBI economic surveys from April found that over four in ten companies said that they are cutting investment due to high energy costs.
Hellem adds: “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. At a time when we really need firms to invest, electrify and compete on the world stage, these costs make all three goals more difficult, representing a massive drag on economic growth.”[ii]
A blueprint for growth
To address the burden on business and unlock growth, CBI and Energy UK provide a blueprint containing several recommendations for policy reforms and government interventions. If implemented in full, it is estimated that these recommendations could unlock an additional £130 billion in economic activity between 2027 and 2050:
1. 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.
· Reform business energy taxes by taking Climate Change Levy charges off non-domestic electricity.
2. 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.
3. Support business electrification and energy demand management.
· Launch the Business Energy Upgrade scheme for SMEs.
· Offer targeted operational expenditure discounts to incentivise electrification.
· Offer guarantees for corporate Power Purchase Agreements to drive market expansion.
ZCA note that while these recommendations would lower electricity costs for businesses, much of the proposed saving comes from reallocating policy costs rather than removing them entirely, raising questions about how the burden would be shared between taxpayers, consumers and investors.
CBI & Energy UK do also acknowledge and welcome recent government interventions, including the British Industry Supercharger (BIS) and British Industrial Competitiveness Scheme (BICS), but highlight their narrow impact- with an estimated 2.7 million businesses remaining ineligible and continuing to struggle with high electricity costs. The measures also fail to address the structural problems associated with the UK’s reliance on global fossil fuel markets, and do not incentivise businesses to electrify.
“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’.”[iii] – CBI & Energy UK
They stress that reducing business energy costs is not just an energy policy, it is a part of an economic and industrial strategy. The proposals would relieve cost-of-living challenges by lowering electricity bills across the economy, including in sectors where cost pressures feed directly through to higher consumer prices, such as food and drink, and retail.
References
[ii] Ibid
[iii] cutting-business-energy-costs-a-blueprint-to-boost-growth.pdf
