The incoming Prime Minister should make reducing business energy costs an early economic priority, according to the CBI and Energy UK, which argue that a package of electricity market reforms could unlock an additional £130bn of economic activity by 2050.

A report published by the two organisations, with analysis from Cornwall Insight and the National Institute of Economic and Social Research (NIESR), argues that persistently high electricity prices have become a structural drag on the UK's competitiveness, discouraging investment and holding back productivity across the economy.

Industrial electricity prices in the UK are around 45 per cent higher than the G7 median, leaving British businesses at a disadvantage against international competitors, the report says. While government support is available for the most energy-intensive industries, around 2.7 million businesses — accounting for 90 per cent of non-domestic electricity consumption — continue to face elevated energy costs. CBI research also suggests that four in ten companies have cut investment as a result.

The report argues that lowering business energy costs should sit alongside the government's wider industrial strategy, warning that failure to act risks deterring investment and weakening long-term growth.

Its recommendations were developed by a taskforce of business leaders and energy experts, including representatives from BT, Centrica, DHL, EDF, E.ON, HSBC, Jaguar Land Rover, KPMG, SSE and Tesco, together with Professor Tim Leunig. The measures are intended to be implemented from 2026.

The report sets out a three-point plan.

The first priority is to reduce electricity prices by removing Renewables Obligation (RO) and Feed-in Tariff (FiT) costs from business electricity bills. It proposes funding the change either through general taxation, a publicly financed Energy Transition Funding Scheme, or a privately financed alternative developed with the financial services sector. It also recommends removing Climate Change Levy charges from non-domestic electricity. Together, the measures could reduce energy costs for some businesses by up to 20 per cent.

The second priority is to reduce the underlying cost of the energy system by cutting balancing costs through the Reformed National Pricing programme and tightening minimum energy efficiency standards for commercial buildings.

The third is to accelerate business electrification through a Business Energy Upgrade Scheme for SMEs, targeted operational expenditure support to encourage the switch to electric technologies, and government-backed guarantees for corporate power purchase agreements.

The CBI and Energy UK estimate that, taken together, the reforms could generate an additional £130bn in economic activity between 2027 and 2050.