UK Industry Presses Burnham to Extend Electricity Tax Relief to Business Bills
Ofgem's 4% Q4 price cap increase and Iran-driven gas costs have pushed large UK businesses to demand levy relief that so far only households have received.
Large UK businesses called on the Burnham government on Friday (2026-09-11) to remove policy levies from commercial electricity bills, pressing for a relief measure that the government has so far extended only to households. The call comes as Ofgem confirmed a 4% increase to the household energy price cap for October through December, with higher gas prices linked to the war in Iran pushing bills to a three-year high.6
Prime Minister Andy Burnham made the household move first. He announced in July (2026) that the new Labour government would scrap the 5% VAT on household electricity — funded by cancelling the £1.8 billion ($2.4 billion) Digital ID programme. Commercial customers, whose bills carry a heavier load of policy costs, were not included.6
Energy UK and the CBI estimate that removing key policy levies from business electricity bills could cut energy costs by up to 20% and unlock £130 billion of investment, according to a joint report the two bodies published. Energy UK told Montel in the week of July 13 (2026-07-13) that Burnham should make business electricity costs a first-budget priority, calling the current situation a vicious cycle of high bills suppressing investment and demand.4
The policy charges at issue are not marginal. Renewable Obligation costs, Contracts for Difference levies and Capacity Market payments make up a significant share of the non-commodity element on UK business energy bills — charges that competitors in major European markets do not carry in the same way.3
ICE Endex TTF front-month gas fell 3.31% on Friday (2026-09-11) to €79.51/MWh, offering some near-term softness on the wholesale input. But a fall in gas prices does not touch the policy cost stack on business electricity bills, which sits above and separate from commodity pricing. For manufacturers running energy-intensive processes, the TTF move is a footnote.4
The Iran war has dominated gas price direction since the July (2026-07) cap review, when household bills rose sharply. UK Energy Secretary Fahnbulleh addressed energy bill pressures during a Reddit Q&A session reported on August 25 (2026-08-25), as the government sought to manage public expectations ahead of another cap increase. Ofgem's 4% Q4 hike confirms that pressure is not abating.6,5
The broader affordability context helps explain why industry is pushing now. Cornwall Insight, the consultancy, forecast on March 31 (2026-03-31) that the July cap would reach £1,929 for a typical annual household bill, an 18% increase. The Resolution Foundation put the cost of targeted support for the poorest two-fifths of households at £3.8 billion — far below the £24 billion that blanket energy subsidies cost the exchequer during the previous crisis, equivalent to 0.9% of GDP.2
An analyst told Montel on Tuesday (2026-05-19) that decoupling UK electricity and gas prices would be unlikely to deliver lower consumer bills, dampening enthusiasm for the wholesale market reform that some politicians have floated as an alternative. With that route offering limited near-term relief, removing policy levies from commercial bills is the more direct lever available before winter.1
The budget decision is the practical gate. Burnham drew on a cancelled programme to fund household VAT relief; a second measure for commercial customers would require either new fiscal headroom or an explicit trade-off. Energy UK's £130 billion investment unlock is the industry's answer to Treasury's cost objection. The autumn budget is where that argument either gains traction or stalls until the next price shock.4,6