Why Are UK Businesses Paying so Much for Electricity and What Can They Do About It?

For years, UK businesses have faced some of the highest electricity prices in the developed world, leaving many wondering why they’re paying so much and what relief, if any, is on the horizon. Now, with the unveiling of the UK government’s Industrial Strategy, over 7,000 businesses are set to see their electricity bills cut by up to 25%, offering a glimmer of hope. But what’s behind these record-breaking costs, and will this new plan live up to its promises?

If you’re a business owner struggling with sky-high electricity bills, here’s what this shake-up means for you and your bottom line.

Why Are UK Electricity Prices so High?

The UK’s electricity prices are among the worst in Europe for businesses. Why? It comes down to several key factors:

1. Reliance on Gas
   Approximately 26% of the UK’s electricity comes from gas-fired power plants. When the cost of gas spikes on the volatile international market—as it has in recent years due to geopolitical tensions and supply shortages - electricity prices follow suit.

2. Levy Pile-Up
   Businesses foot the bill for policies aimed at cleaner energy, including the Renewables Obligation, Feed-in Tariffs, and the Capacity Market. These levies, while supportive of sustainability, make energy significantly more expensive.

3. A Grid at Capacity
   The UK’s outdated electricity grid struggles to meet growing demand, leading to long waits and high costs for connections. Businesses looking to expand or modernise often face years of delays just to plug into the system.

Together, these challenges have created the perfect storm of high costs, uncertainty, and frustration for UK businesses.

What’s the Government Doing About It?

The Industrial Strategy, launched this week, is being hailed as a game-changer. At its core, the plan focuses on cutting electricity costs, modernising the grid, and reinvigorating the UK’s industrial sectors.

Here’s how:

• 1. Cutting Costs for Energy-Intensive Businesses

  Starting in 2027, over 7,000 of the UK’s most electricity-intensive businesses will benefit from:

  • Exemptions from levies like the Renewables Obligation and Feed-in Tariffs, saving up to £40 per megawatt hour.

  • Bigger discounts on network charges, increasing current relief from 60% to 90% by 2026 for industries like steel, ceramics, and glass.

• 2. Fast-Tracking Grid Connections

  The government is introducing a Connections Accelerator Service by the end of 2025, designed to fast-track grid access for major projects, especially those that create jobs and boost economic growth. This is a critical step to prevent businesses from waiting years for energy upgrades.

• 3. Doubling Down on Clean Power

  From offshore wind to nuclear energy, the government is ramping up investment in renewables. By reducing dependency on gas, the UK aims to lower energy prices long-term while driving the transition to Net Zero.

Could these reforms finally bring UK energy costs in line with global competitors?

Get a Free Consultation now to learn how we can help you stabilise expenses and grow sustainably.

Who Stands to Gain the Most?

While the Industrial Strategy paints a promising picture, the reality is that not every business will benefit equally.

High Energy Users

Industries like aerospace, automotive, chemicals, steel, and glass are arguably the biggest winners. These sectors will enjoy the highest reductions in electricity costs, ensuring they can remain competitive internationally.

Small and Medium Enterprises (SMEs)

SMEs adopting new technologies or expanding operations will see indirect benefits, particularly as grid improvements and streamlined connections reduce delays and costs.

The Clean Energy Sector

Renewable energy companies stand to gain from the government’s increased focus on modernising energy infrastructure and clean energy investment.

However, businesses outside of these high-energy sectors may only experience marginal relief, as eligibility for many of the benefits remains tightly focused on energy-intensive industries.

What Does This Mean for Your Energy Bills?

While the Industrial Strategy offers significant reductions for some, it doesn't yet promise universal relief. For the average business owner, the following questions remain critical:

• When will my electricity bills actually start to go down?

• Am I eligible for these discounts?

• How can my business improve energy efficiency now, rather than waiting until 2026 or beyond?

If you’re unsure how these changes will impact your business, now’s the time to take stock of your energy consumption and identify opportunities to cut costs proactively.

What Can Businesses Do Right Now?

Waiting for government reforms isn’t the only option. Here are four actionable steps your business can take today:

1. Get an Energy Audit
   Before adopting new technologies, it’s essential to understand where your energy is being wasted. An audit can identify inefficiencies and highlight quick wins, from smarter lighting to better insulation.

2. Reduce Energy Use
   The greenest and cheapest energy is the energy you don’t use. Simple measures like switching to LED lights or installing energy monitoring systems can make a big difference without major investment.

3. Explore Renewable Energy Options
   If grid delays are holding you back, consider generating your own energy. Solar panels paired with battery storage, for example, can significantly reduce reliance on traditional grid power.

4. Stay Ahead of Policy Changes
   With consultations planned to finalise eligibility criteria for the Industrial Strategy’s benefits, keeping informed could make all the difference. Proactively preparing for compliance can help your business access these benefits faster.

Want to reduce costs and emissions today? Book your free consultation with Energy Oasis to start your energy-saving plan.

Could This Be the Turning Point for UK Energy?

The UK’s Industrial Strategy sends a clear message to the world: Britain is open for business. By addressing high electricity costs and grid inefficiencies, the government aims to lower barriers for businesses and supercharge economic growth.

However, challenges remain. The implementation timelines are long, leaving businesses to bridge the gap in the meantime. For thousands of companies struggling with energy costs, the question is simple:

What can I do to cut costs now, without waiting for government intervention?

Energy Oasis is here to help. With a focus on saving energy before selling it, we offer tailored solutions for Yorkshire and UK businesses to reduce consumption, cut costs, and stay ahead of the curve.

Get in touch today for your free consultation and start transforming your energy use.