A combined group of business leaders and think tanks has delivered a blueprint for growth to the incoming Prime Minister Andy Burnham, calling for a cut in energy costs as an immediate priority.
They warn that without tackling the country’s cost of doing business he will not achieve his targets for economic growth and raising living standards.
A new report from the CBI and Energy UK, with analysis from Cornwall Insight and the National Institute of Economic and Social Research (NIESR) says energy costs could be cut by a fifth and give the economy a £130 billion boost by 2050.
This would require removing a range of green levies, in particular the Renewables Obligation (RO) and Feed-in Tariff (FiT) costs for all businesses.
Analysts say Britain’s electricity prices are 45% higher than the G7 average, putting businesses at a competitive disadvantage, stifling investment and contributing to the country’s sluggish productivity growth since the 2008 global financial crisis. The report says four?in ten companies are cutting?investment due to high energy costs.
Louise Hellem, CBI chief economist, 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.”
The warning comes as a cross-industry group led by North Sea energy producers will deliver a strongly worded letter to the incoming government today, warning that policy makers must back homegrown oil and gas ahead of imports, alongside greater support for UK manufacturing and industry.
The letter is signed by industry executives, trade unionists, and trade bodies from chemicals to engineering, aggregates and building materials to the offshore energy sector and the shipping industry.
It is being sent to all 403 Labour MPs and makes clear that the UK economy is at a turning point. It says decisions made now will be key to the economic success or failure of the UK in the coming decades.
David Whitehouse chief executive of Offshore Energies UK said: “Our colleagues in other industries are joining us to show their support for this basic message.
“Energy security, economic resilience and reindustrialisation depend on maintaining domestic energy production as well as greater investment in renewable and low-carbon technologies.
“We fully support the government’s ambition to build a secure, lower-carbon energy system, but energy transition must follow an “all-energy approach” that builds on existing industrial strengths and strengthens rather than weakens national industrial capability.”
Gary Smith, GMB Union General Secretary, said: “In an increasingly uncertain world, it is more important than ever that we can get the energy we need to power our homes, businesses, and essential public services.
“We will need oil and gas for decades to come. Increasing our reliance on imported energy from overseas for the essential elements that power our economy and keep the country going, leaves us worryingly exposed.
“GMB is looking to the Government to show it understands the significance of this moment – jobs, communities, and our national security are at stake.”
Resumption of hostilities drives up oil price
Oil prices have climbed to their highest level in four weeks after the US reinstated a naval blockade on Iran and announced plans to charge ships a 20% toll on all cargo transiting the Strait of Hormuz.
Brent crude futures rose 2.1% to $85.11 a barrel in early Tuesday trading, extending gains after Brent surged 9.6% in the previous session – its biggest single-day rise since May 2020.
Prices have now climbed to their highest levels since the US and Iran signed a memorandum of understanding on 17 June aimed at ending the conflict.
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