Energy UK tells Burnham to strip policy costs from business bills to break high-price trap

Energy UK tells Burnham to strip policy costs from business bills to break high-price trap A joint industry report estimates removing levies from business electricity bills could cut costs by 20% and unlock £130bn in investment. Energy UK on Friday (2026-07-17) called on incoming prime minister Andy Burnham to strip policy costs from business electricity bills in his first budget, warning that Britain is trapped in a self-reinforcing cycle of high prices and depressed demand that is eroding industrial competitiveness.⁵ The trade body's comments, made to Montel this week (week of 2026-07-13), were backed by a joint report with the CBI, which represents British industry. That analysis estimates removing key policy levies from commercial electricity bills could cut business energy costs by up to 20% and unlock GBP 130bn of investment in the UK economy.⁵ The scale of that potential unlocked investment — nearly a tenth of annual UK GDP — signals how constrained businesses regard the current tariff structure. Policy costs already account for around 20% of household electricity bills, according to industry estimates, and commercial tariffs carry an equivalent burden.³ The structural driver of those bills has proved persistent. Gas-fired plants set the electricity price in 89% of hours in the UK so far in 2026, according to calculations by Ember, a think-tank, a ratio that gives ICE Endex TTF front-month — trading at €54.82 per MWh as of Friday (2026-07-17) — an outsized influence over what British businesses pay. Spain's equivalent figure stands at 15%, partly reflecting a different generation mix. High gas exposure translates directly into high price volatility at the meter.^3,5 Previous governments recognised the problem. Measures aimed at breaking the link between wholesale gas and electricity prices were broadly welcomed by industry when outlined, though trade bodies including Energy UK cautioned that any reform must preserve incentives for new generation capacity. Without those incentives, decoupling risks removing the price signals the industry relies on to justify capital commitments.¹ The concern is not abstract. Britain's net-zero transition requires sustained capital flowing into offshore wind, grid upgrades and flexible backup capacity. High bills compress the industrial base that provides both the demand signal and the tax revenues underwriting public investment. Energy UK's argument to Burnham, in effect, is that lower costs and a functioning investment pipeline are compatible only if policy costs are reorganised rather than simply passed through the supply chain.^5,1 A separate distortion runs through the system. Ofgem, the regulator, has identified instances in which parties submitted bids to network operator Neso's capacity auctions at extremely high prices, well above the imbalance levels subsequently observed — raising questions about capacity hoarding during interconnector trading that inflates Neso's balancing costs and ultimately feeds into consumer bills. Analysts told Montel in May 2026 that such practices may be contributing to elevated UK electricity costs independently of the commodity price level.⁴ Burnham can remove policy levies from bills. He cannot, in the short term, alter the gas dependency of the generation mix or the regulatory gaps that may allow strategic bidding in balancing markets. Both require decisions from Ofgem and more fundamental grid reform running well beyond a first budget.^4,1 The IMF has separately warned that the UK is among Europe's more exposed economies to Middle East supply disruptions given its gas dependence, adding an external risk dimension to a domestic cost problem that Energy UK is framing as a matter of first-budget urgency.² Whether Burnham acts on the levy question in his first fiscal statement, and whether any restructuring preserves sufficient returns to keep the investment pipeline open, will determine whether British industry's electricity bills begin converging toward European peers — or whether the 89% gas price-setting ratio continues to anchor them well above those of economies that moved earlier to diversify their generation mix.^5,1,3