High energy costs leave Britain £30bn poorer
High energy costs leave Britain £30bn poorer
Emma TaggartTue, May 12, 2026 at 5:00 AM UTC
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Energy-intensive industries, such as steel, are most affected by rising prices - Getty
High energy costs driven by green levies have left Britain £30bn poorer, experts have said.
EY said the economy was £30bn smaller than it otherwise would have been after a surge in power costs crippled the UK’s energy-intensive industries, such as cement, steel, glass and ceramics.
Peter Arnold, the chief UK economist at EY, blamed a reliance on gas and new green levies, introduced by successive governments, for driving up energy costs.
“Policy costs to support new renewables, new nuclear, and capacity to meet peak demand, as well as the cost of an expanding power grid” explained why energy prices had risen significantly higher in Britain than other European nations, he said.
British businesses pay the highest prices for electricity of anywhere in the developed world, according to government figures.
EY found that this had significantly weighed on the UK’s energy-intensive industries since 2019. The sector shrank by 8pc between 2019 and 2024, while all other industries grew by more than 6pc. If energy-intensive industries had grown at the same rate as the rest of industry, GDP would be £30bn larger.
Factory chiefs have repeatedly called on ministers to urgently address net-zero-related costs and green levies lumped onto energy bills.
In April, Rachel Reeves announced that about 10,000 businesses would benefit from the British Industrial Competitiveness Scheme (BICS), which will see three green levies waived for companies across eight sectors from April 2027.
However, businesses have warned they cannot wait a year for support and said the 25pc reduction in electricity bills that BICS delivers does not go far enough.
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Claire Coutinho, the shadow energy secretary, said: “Green levies and non-commodity costs are driving our eye-wateringly high electricity bills. This is causing huge pain for industry and households, and holding us back from the industries of the future like AI.”
The last Conservative government introduced a number of green levies to bills but in opposition has become far less supportive of net zero policies.
Calls for further action to bring down bills come as war in Iran triggers a fresh energy shock. Worries about a renewed cost-of-living crisis have prompted Britons to reduce their spending for the first time in 18 months, according to Barclaycard.
Card spending fell by 0.1pc in April compared with the same month a year earlier, the first monthly decline since November 2024.
Spending on travel fell by 5.7pc in April compared with a year earlier, following a 3.3pc decline in March, amid fears that jet fuel shortages could prompt a wave of cancellations.
Separate figures from the British Retail Consortium and KPMG suggested shops were faring better. The data, which only measure retail spending, showed that total retail spending climbed 1.5pc in March and April compared to a year earlier.
However, the trade association warned that retailers were facing a “challenging few months ahead” as consumer confidence remained weak.
Megan Greene, an external member of the Bank of England’s Monetary Policy Committee, said rising mortgage payments were holding back household spending.
Speaking on Bloomberg’s Odd Lots podcast, Ms Greene said: “Even though rates are coming down, as people come off a five year fixed mortgage, their own debt servicing costs are jumping massively from where they were.”
A government spokesman said gas was a key driver of electricity prices and said ministers were taking “bold action” to bring down energy bills for businesses through BICS.
Source: “AOL Money”
