UK businesses could see energy costs fall by as much as 20% under a proposal to strip several taxes and renewable charges out of commercial electricity bills. The plan comes from the CBI and Energy UK, which want the government to remove Renewables Obligation and Feed-in Tariff costs from all non-domestic electricity bills and to stop applying the Climate Change Levy to the electricity businesses use.
The useful bit first: this is a proposal, not an announced bill cut. No law has changed, no supplier has been told to remove anything, and the saving does not belong in your budget yet. The two bodies published their case (CBI and Energy UK); the government has not adopted it.
Status checked 14 July 2026: The CBI and Energy UK have published their recommendations. The government has not confirmed that any of these charges will be removed from business electricity bills. Treat the figures below as the report’s estimates, not policy.
What is being proposed
Three changes sit at the centre of the report:
- Remove Renewables Obligation costs from business electricity bills.
- Remove Feed-in Tariff costs from business electricity bills.
- Stop charging the Climate Change Levy on non-domestic electricity.
The Renewables Obligation and Feed-in Tariff schemes were set up to fund renewable generation. Both have since changed or closed to new entrants, but suppliers still recover their existing costs through bills. The Climate Change Levy is a tax on most business electricity and gas; its main rate rose to 0.801p per kWh on 1 April 2026 (GOV.UK).
Those renewable costs would not vanish. The report proposes moving them, paying instead through general taxation or a new Energy Transition Funding Scheme, funded either publicly or through private finance. So the plan is mostly about where the cost sits and who carries it, not scrapping the UK’s renewable commitments. On the report’s own numbers, moving the charges would cost the Treasury around £4.8 billion a year this decade, which is the bill someone else would have to pick up.
What a 20% cut could be worth
Applying the report’s headline maximum to the indicative annual bills in our guide to average business energy costs gives a rough sense of scale. These are illustrations, not forecasts: the levies being removed sit on the electricity side, so a business that burns more gas than power would see less than the full 20%.
| Example business | Indicative annual bill (before VAT) | Illustrative 20% maximum |
|---|---|---|
| Micro business | £4,300 | £860 |
| Small shop or office | £7,000 | £1,400 |
| Cafe or light hospitality | £11,300 | £2,260 |
| Pub or restaurant | £19,700 | £3,940 |
| Small workshop | £29,500 | £5,900 |
A heavy electricity user, a refrigerated shop, a laundry, a manufacturer, a workshop running machinery, stands to gain most. A low-use office would still benefit, but the cash figure would be smaller. The actual saving would depend on your electricity share of the bill, your consumption, your contract and the final policy design, so treat the right-hand column as a ceiling, not an expectation.
Why business electricity is under pressure
The report’s argument is that electricity costs have become a drag on investment. It puts UK business electricity prices around 45% above the G7 median and says roughly four in ten firms have held back investment because of energy costs, a figure the House of Lords Library also cites in its own briefing (House of Lords Library). It estimates that about 2.7 million businesses, responsible for roughly 90% of non-domestic electricity use, sit outside the government’s main industrial energy support, including plenty of ordinary SMEs that use a lot of power but are not in a designated energy-intensive industry.
Part of the problem is that a bill is not just the power you use. It also carries network and distribution charges, renewable and environmental policy costs, capacity and balancing costs, the Climate Change Levy, supplier margin, and metering and standing charges. These non-commodity costs can keep rising even when wholesale prices fall, which is why a softer energy market does not always show up as a cheaper renewal quote.
How it differs from the support that exists
The government has already announced the British Industrial Competitiveness Scheme, due to cut electricity bills by up to 25% for more than 10,000 eligible manufacturers from April 2027 by exempting them from the indirect costs of the Renewables Obligation, Feed-in Tariffs and the Capacity Market, worth roughly £35 to £40 per MWh (GOV.UK). But that support is targeted at selected industries such as automotive, aerospace, steel and pharmaceuticals. Most shops, offices, hospitality businesses, trades and professional firms will not qualify.
The CBI and Energy UK plan is broader: it would take the Renewables Obligation and Feed-in Tariff costs off electricity bills for all businesses, and remove the electricity Climate Change Levy, which the industrial scheme does not touch.
The £130 billion figure needs context
The report says its recommendations could add £130 billion to UK economic activity between 2027 and 2050. That is not a fund and not money handed to businesses. It is a modelled estimate of extra real GDP over more than two decades, built on the assumption that lower electricity prices let firms invest, raise productivity and compete, and that the displaced charges are covered through general taxation. Like any long-run forecast, it depends entirely on its assumptions, and it sits against that near-term Treasury cost of roughly £4.8 billion a year. Read it as a possible upside, not a promise.
Beyond the levy changes, the report also floats an energy-efficiency upgrade scheme aimed at SMEs, tighter minimum efficiency standards for commercial property, measures to cut electricity balancing costs, help to switch fossil-fuel equipment to electric, and government-backed guarantees to widen access to corporate Power Purchase Agreements, the longer-term contracts to buy power directly from a generator that have mostly been the preserve of large firms. Those ideas would need a lot more development before they reached an ordinary SME.
Do not delay a renewal while you wait
There is no confirmed date for any of this, and no guarantee the government adopts it. Letting a contract lapse in the hope of a policy change is how firms end up on expensive deemed or out-of-contract rates. Businesses have no household-style price cap to fall back on, and a commercial energy contract can become binding the moment you accept it on the phone, with no general cooling-off period (Ofgem). So the practical moves are the same as ever, and worth doing now:
- Record your contract end date, notice window and termination terms yourself. Do not wait for a supplier or broker to prompt you.
- Use your real consumption. Pull the last 12 months of electricity and gas in kWh from actual bills, not an estimate from staff numbers or floor space.
- Check whether the Climate Change Levy should even apply. Very low-use sites, no more than 33 kWh of electricity or 145 kWh of gas a day, can qualify for the reduced 5% VAT rate and Climate Change Levy relief; check it is being applied, as your supplier may need you to confirm the low usage (GOV.UK).
- Compare the whole deal, not the headline unit rate: standing charge, fixed or variable, term length, renewal and exit terms, broker commission, and the total cost against your actual usage.
A policy change might one day lower the rate you pay. It will not fix wasted consumption, and electricity still costs far more per kWh than gas, so trimming lighting, refrigeration, machinery left running and overnight standby usually pays back faster than waiting on Westminster. If energy is one of several bills stretching your cashflow, the same discipline that works for planning tax payments applies here: forecast the cost, and act on the renewal date rather than the news.
The honest reading
The proposal targets a real problem. High electricity costs reach far past energy-intensive factories: they set the price of running a shop, cooling food, heating premises and buying new equipment. Stripping renewable policy costs and the Climate Change Levy out of electricity bills could genuinely help, especially for power-hungry SMEs that get no support today.
But 20% is a maximum, not a promise, and the money behind it still has to come from somewhere. What a business eventually saves depends on which recommendations are adopted, how the displaced costs are funded and how suppliers pass the change through to individual contracts. For now, this is a policy development worth watching, not money already saved.
