Andy Burnham told to crack down on sky-high energy costs from day one in office or leave Britain's growth at risk

The next Prime Minister must address sky-high industrial energy prices on their first day in office, leading business voices say.

They warned the incoming PM, expected to be Andy Burnham, that high energy costs “continue to damage business investment, reduce our international competitiveness and worsen the cost-of-living crisis”.

But a series of steps, including removing certain green charges from all industrial electricity bills, could unlock £130billion in economic activity between 2027 and 2050, a joint report from the CBI and Energy UK finds.

A failure to take action “risks putting further growth and investment in jeopardy”.

“High energy costs are no longer just an energy market problem for the UK – they are an anchor weighing down productivity and competitiveness across the whole economy”, they warn.

Mr Burnham is expected to take over as Labour leader and UK Prime Minister later this month.

Insiders have predicted a swift handover from Sir Keir Starmer, but he is expected to face a daunting in-tray, with energy likely to be a key issue.

Mr Burnham has already hinted at changes, saying: “Britain is paying too much for the basics.

“People are paying too much, but businesses are also paying too much, and that is certainly true of energy.” The new report says that reducing business energy costs must be a “day-one priority”.

It points out the UK industrial prices are 45 per cent higher than the G7 median, with four in ten companies cutting investment due to these costs.

Although support schemes exist, such as the British Industry Supercharger, many companies fall outside this relief.

These firms could see bills rise by up to 20 per cent by next year. The report, which includes analysis from Cornwall Insight and the National Institute of Economic and Social Research (NIESR), recommends that all business users are given exemptions to certain costs.

The Renewables Obligation, which pays older green generators a premium for electricity, and Feed-in Tariffs, which guarantee payments to small-scale renewable energy producers, should both be moved from all business bills, says the report.

This could be funded by general taxation or the creation of a publicly financed funding scheme.

A reform of business tax should also be carried out to remove the Climate Change Levy from company bills.

This is an environmental tax on non‑domestic electricity and gas that was designed to push businesses to cut energy use and reduce emissions.

Collectively, these measures could cut total energy costs by up to 20 per cent, the authors say, closing the gap with international competitors.

This alone could “deliver a £130billion boost to the economy by 2050”.

The report further recommends that the Reformed National Pricing programme, the Government’s electricity market reform package, be used to cut balancing costs.

These are the costs of keeping the grid balanced and secure. The introduction of renewables, which often cannot guarantee a 24/7 supply, have pushed them higher.

It also calls for more financial incentives for businesses to electrify. Louise Hellem, Chief Economist at the CBI, said: “Years of loading policy costs onto electricity bills have left UK businesses facing some of the highest electricity costs among the world’s biggest economies.

“At a time when we really need firms to invest, electrify and compete on the world stage, these costs make all three goals more difficult, representing a massive drag on economic growth.

“With a new Prime Minister coming into office, it’s clear that reducing business energy costs must be a day-one priority.

“If we want to tackle the cost of living and invest in public services, we need stronger economic growth – and that can’t happen while firms are navigating sky-high energy bills.

“Reliable, affordable energy is essential for all businesses. That starts by removing policy costs from bills, reforming our energy system and shaping the market to make electrification more practical and affordable.”

Dhara Vyas, Chief Executive of Energy UK, said: “The UK cannot afford to let high energy costs continue to damage business investment, reduce our international competitiveness, and worsen the cost-of-living crisis.

“Energy is an essential service that underpins both daily life and economic growth.

“Yet years of making policy decisions with little regard to the impact on business energy users has left the UK with some of the highest industrial energy costs in the developed world.

“If we are serious about growth and competitiveness, it is time to address these challenges and put in place a more effective long-term approach.

“Every Government talks about growth, investment and rebuilding Britain’s industrial strength but we need to see immediate action.

“Taking policy costs from bills, making sure our energy system works better for all businesses, and making it easier for them to electrify can move us away from stagnation towards a thriving economy that stands shoulder to shoulder with our international counterparts.

“With £130billion up for grabs from our recommendations, the new Prime Minister has a ready-made blueprint to work with industry and make the UK a better place to live and work.”

Dan Morris, CEO of Cornwall Insight, said: “Rising electricity bills are putting real pressure on businesses, shaping decisions on investment and how quickly they can electrify.

“That pressure is heightened by how difficult energy costs have become to plan for, with variability and uncertainty now almost as big a challenge as the price itself.

“And while wholesale markets get most of the attention, it’s rises in policy costs and network charges that are locking in price pressures through this decade and undermining businesses' ability to predict them.

“Our data shows industrial businesses that fall outside existing support schemes could see bills rise by as much as 20 per cent by 2027, a jump that will land hardest on the sectors already competing to keep costs down.

“With a new Prime Minister set to take office, and growth and investment high on the agenda, understanding the impact of policy and network costs on businesses across different sectors will be essential.

“The decisions made now about sharing the costs of the energy transition will help determine whether businesses can invest, compete and electrify at the pace the country needs to grow.”

A Government spokesperson said: “Our manufacturing industries are vital to the UK's success and economic growth, and we are taking action to tackle the cost of energy.

“Our new British Industrial Competitiveness Scheme will help to reduce electricity bills by up to 25 per cent for over 10,000 manufacturing businesses while our Supercharger scheme will cut electricity costs for hundreds of our most electricity-intensive businesses.

“We have also announced £470million of support for the chemicals and ceramics industries and are working to get off the fossil fuel rollercoaster and onto clean homegrown power we control to bring energy security and lower bills for good.”