Andy Burnham will walk into Downing Street next week with an in-tray already overflowing, but business has told him exactly where to start: energy bills that sit 45 per cent above the G7 average and act, in the words of the CBI and Energy UK, as an “anchor” holding back the economy.
Stripping a suite of green levies out of business energy bills could cut costs by a fifth and deliver a £130 billion boost to the economy by 2050, according to a report from the two lobby groups published on Tuesday, compiled with analysis from Cornwall Insight and the National Institute of Economic and Social Research.
For smaller firms the stakes are immediate. Retailers, food and drink producers and hospitality businesses, the sectors least able to hedge or absorb energy costs, stand to benefit most from the recommendations. That will resonate with the eight in ten SME owners who already fear what a Burnham premiership will mean for their business.
The problem is not new, but it is getting worse. Britain’s electricity prices put firms at a competitive disadvantage, stifle investment and have contributed to the country’s sluggish productivity growth since the 2008 financial crisis, official price data shows. The war in the Middle East has compounded the pain, with the UK’s heavy reliance on imported gas pushing factory costs up at their fastest pace since Black Wednesday.
The report’s central charge is that successive Conservative and Labour governments have spent decades loading the cost of the net-zero transition onto electricity bills. Its remedies include scrapping the renewables obligation, a scheme launched in 2002 requiring suppliers to provide a set quantity of renewable energy, and ditching a two-decade-old levy on businesses using electricity generated outside the UK. The lost revenue, it argues, should be recouped through general taxation or a public fund.
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