The UK government is under mounting pressure to slash energy costs for households and heavy industry by reforming the complex web of green levies currently loaded onto electricity bills.
Trade bodies warn that these charges are pushing up electricity prices to some of the highest levels globally, hurting competitiveness and hindering the shift to low-carbon heating.
According to Make UK, the manufacturers’ trade body, British industry is at risk of losing ground unless urgent steps are taken to cut industrial energy costs.
The organisation claims UK manufacturers are now paying 46% more for energy than the global average – a key threat to the success of Labour’s forthcoming industrial strategy, expected later this month.
As part of its proposed reforms, Make UK is calling on the government to simplify energy policy levies, which it says unfairly make low-carbon electricity more expensive than fossil fuels.
Their proposal includes a state-backed fixed energy price scheme for manufacturers, where the government would top up payments when wholesale prices surge and reclaim funds when prices drop.
Stephen Phipson, CEO of Make UK, warned: “If we fail to tackle the UK’s excessive industrial energy costs, we risk a wave of deindustrialisation. Manufacturers have long been at a disadvantage compared to European counterparts, undermining our global competitiveness.”
Energy UK, which represents the energy sector, has also weighed in. The organisation argues that current policy costs disproportionately affect electricity, making low-carbon technologies like heat pumps far more expensive than gas heating.
To address this, it has proposed rebalancing levies – shifting some of the charges from electricity bills onto gas bills.
This could save electric-heated homes an average of £400 annually, while gas users would face a modest increase of around £40, mitigated through targeted state support for lower-income households.
Energy UK estimates the policy shift could save the government £40 billion by 2040 in the national transition from gas to electric heating, compared to the current levy structure.
In response, a government spokesperson reiterated its commitment to clean, domestically produced energy as part of the clean power mission, which aims to shield the UK from global fossil fuel price volatility.
They added that the British Industry Supercharger scheme is already helping energy-intensive sectors like steel and chemicals, with projected savings of £5bn over the next decade.
“We are reviewing a range of options for long-term energy market reform, including the rebalancing of electricity and gas prices, while keeping consumer impact at the core of our strategy,” the spokesperson said.
The renewed focus on industrial energy reform comes as British business faces economic headwinds.
Business Secretary Jonathan Reynolds is expected to press the US administration this week to lift tariffs on UK steel exports, after former President Trump pledged to double global steel duties to 50%.
Meanwhile, the CBI reports that UK private sector growth is set to slow to its weakest level in three years, and a third of hospitality businesses are said to be operating at a loss due to higher National Insurance contributions and business rates.
