UK business electricity charges should be restructured to reduce operating costs and support investment, according to a joint blueprint from the Confederation of British Industry and Energy UK.
The organisations say British companies are paying about 45% more for electricity than the G7 median, weakening competitiveness while labour, finance, property, and supply chain costs remain elevated.
Analysis prepared with Cornwall Insight and the National Institute of Economic and Social Research estimates that removing selected policy costs and taxes from business electricity bills could generate more than £130bn of additional economic output between 2027 and 2050.
The blueprint calls for Renewables Obligation and Feed-in Tariff costs to be removed from commercial bills. Three funding options are proposed: general taxation, a publicly financed energy transition fund, or a private financing structure developed with the financial services sector.
Removing the Climate Change Levy from non-domestic electricity is also recommended. Taken together, the measures could reduce total energy costs by as much as 20% for some organisations, although the benefit would vary according to consumption, tariff structure, and exposure to other fuels.
Further proposals include reforming national electricity pricing, increasing minimum energy efficiency standards for non-domestic buildings, creating an upgrade scheme for smaller companies, and offering targeted operating cost discounts to support electrification.
Guarantees for corporate power purchase agreements are also suggested, potentially reducing risk for organisations entering long contracts with renewable generators. Such agreements can provide price certainty, but smaller users often lack the purchasing scale, credit profile, or specialist expertise needed to negotiate them effectively.
The proposals arrive while UK manufacturers are contending with weak demand as well as persistent cost pressure. Manufacturing order books have fallen to their weakest level since 2020, with output declining across most sub-sectors.
High electricity prices create a difficult investment cycle. Companies are being encouraged to electrify industrial processes, transport, heating, and other operations, yet the price of electricity can weaken the financial case for doing so. Gas equipment may remain in service for longer, while replacement projects are delayed even where suitable electric technology is available.
The exposure extends beyond energy-intensive manufacturing. Retailers, hospitality operators, warehouses, offices, data centres, food producers, and service organisations all carry electricity costs, whether directly or through rents, logistics, suppliers, and outsourced operations.
Transferring policy charges into general taxation would change how the cost is distributed rather than make it disappear. Taxpayers, households, companies, and other areas of public spending could ultimately bear the burden, requiring a clear funding mechanism and protection against a sudden fiscal gap.
A privately financed arrangement would create different constraints. Investors would expect a return, meaning costs could be deferred rather than removed. Any structure would need to avoid complicated liabilities or long commitments that become expensive when interest rates or energy market conditions change.
Price reform also has to be considered alongside the investment required in generation, transmission, distribution, storage, and system flexibility. Reducing charges without a stable replacement could make infrastructure more difficult to finance, while insufficient investment would prolong network constraints and balancing costs.
Patterns of energy use vary considerably. A manufacturer operating continuous machinery has a different exposure from a restaurant with sharp peaks, a refrigerated warehouse, or an office that can alter demand around working hours. A uniform discount could therefore produce uneven benefits and reward consumption without improving efficiency.
Investment in buildings and equipment offers a less uncertain route to lower costs. Better insulation, motors, refrigeration, heat recovery, controls, and demand management can reduce usage without relying entirely on future wholesale prices.
Smaller companies frequently struggle to proceed because projects require upfront capital, reliable technical advice, and management time. A business energy upgrade scheme could address some of those barriers, although its effectiveness would depend on simple access, competent contractors, and credible measurement of savings.
Previous support programmes have sometimes been weakened by fragmented administration, narrow eligibility, and uncertainty over how long incentives would remain available. Companies are less likely to commit capital when the support framework may change before a project is designed and approved.
Corporate power purchase agreements could assume a larger role as organisations seek predictable costs and lower carbon supplies. Guarantees may widen access, but long contracts expose buyers to volume, credit, technology, and market risk. Boards will need to understand whether a proposed agreement represents an operational procurement decision, a financial commitment, or both.
International comparisons add pressure to the debate because energy prices influence where companies locate production, data infrastructure, research facilities, and other capital-intensive operations. Investment placed elsewhere is unlikely to return automatically after a later reduction in costs.
Lower bills will not resolve weak demand, planning delays, financing constraints, or skills shortages, but they could improve project economics and reduce the contradiction between encouraging electrification and imposing a substantial price premium upon electricity use.
The government must now decide whether legacy charges should remain attached to consumption, transfer to the public balance sheet, or be financed through another structure. Each route carries consequences for investment, taxpayers, energy infrastructure, and the pace at which companies can reduce their reliance on fossil fuels.
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