The UK government faces pressure to significantly reduce the energy costs for households and heavy industry by reforming the high taxes imposed on electricity bills. These policy levies make the UK one of the countries with the highest energy bills in the world, which in turn puts British industry at a disadvantage and hinders the transition to lower-carbon heating systems for households, according to industry trade groups.
Make UK, a trade organization, has warned that the government’s delayed industrial policy risks being jeopardized by the high energy prices faced by UK manufacturers, which are 46% higher than the global average. The group calls on the government to cut industrial energy costs as part of Labour’s industrial strategy by simplifying and making fairer the policy levies that currently make low-carbon energy more expensive than fossil fuels.
The proposed plan includes the state guaranteeing a fixed energy price for manufacturers. Under this scheme, manufacturing firms would receive payments from the government if energy wholesale costs rise above the set price, but they would repay the difference to the government if the wholesale price drops below the agreed price.
Stephen Phipson, Make UK’s chief executive, stresses the urgency of addressing high industrial energy costs in the UK to secure the country’s future, attract investment, and avoid another phase of de-industrialization. UK manufacturers have faced energy prices far above those of their European competitors, undermining their ability to invest, grow, and compete globally.
Energy UK, another trade organization, blames the government’s levies, mainly on electricity bills, for making cleaner alternatives like heat pumps artificially expensive compared to gas. They propose “rebalancing” the charges on electricity bills to gas bills, which could save homes using electric heating £400 a year. They suggest that state subsidies could help low- and middle-income gas-using households that would face an extra cost under their proposal.
The plan would render the government’s shift from gas to electric heating about £40bn cheaper by 2040 if policy costs are removed from bills. A government spokesperson highlights the clean power mission aimed at stabilizing business and household finances with clean, homegrown energy. The British Industry Supercharger, a government program aimed at reducing energy costs for sectors such as steel, metals, and chemicals, is expected to save businesses £5bn over the next 10 years.
The spokesperson also mentions the ongoing consideration of options for long-term energy market reform, including the balance between gas and electricity prices, with consumer interests at the core of their strategy.
These discussions come as British businesses face a series of challenges, including talks about reducing taxes on UK steel exports to the US and concerns over declining activity levels in the private sector, as indicated by the CBI’s latest growth survey. An additional poll of the UK hospitality industry suggests that recent increases to employer national insurance contributions and changes to business rates mean that a third of the sector is currently operating at a loss.
Source: https://www.theguardian.com/business/2025/jun/02/high-electricity-bill-taxes-holding-us-back-say-industry-groups
