A new government, familiar energy challenges: what businesses should watch next

What do the early signals tell us?

The new government's messaging has centred on the cost of living, affordability and ensuring economic growth reaches all regions and nations through reindustrialisation and infrastructure investment. Energy sits at the heart of each of those ambitions.

The most immediate signal is the focus on energy affordability. The government’s early decision to cut VAT on household energy bills reflects a long-standing call from industry and was broadly welcomed, although its direct impact will be limited for many businesses. Some non-domestic consumers may be eligible, but the move should not be read as a clear signal of imminent wider support for business energy costs – though Government has committed to looking at this issue. What it does show is how central affordability has become to the wider energy debate. For industry, that question remains closely linked to competitiveness, particularly for manufacturers and other electricity-intensive sectors facing higher power costs than many international competitors.

Alongside affordability, there’s little evidence of any shift away from the UK's long-term decarbonisation goals, including Clean Power 2030 and Net Zero by 2050. The appointment of Miatta Fahnbulleh as Energy Secretary suggests some continuity on net zero, even if specific policies and delivery mechanisms evolve. The challenge for government will be finding ways to maintain progress on decarbonisation while supporting affordability, growth and improving competitiveness.

Infrastructure investment is already a key priority across the energy system, particularly as grid constraints continue to affect connections, electrification projects and new low-carbon assets. Burnham's record in Greater Manchester demonstrated a strong focus on transport, regeneration and regional development, suggesting this emphasis is likely to continue rather than represent a completely new direction.

These themes closely mirror the priorities identified by Energy UK and the CBI. Their blueprint calls for action across five areas:

• Reducing policy costs on electricity
• Supporting industrial electrification
• Improving UK competitiveness
• Accelerating grid and infrastructure investment
• Providing long-term policy certainty

Taken together, these recommendations reflect a central challenge for policymakers: how to balance the physical challenges on the energy system, continue progress towards net zero, and to deliver affordable energy to business and household consumers.

Where policy could evolve next

While major reforms are unlikely to happen quickly, several areas warrant close attention.

Industrial electricity prices will remain part of the policy debate. Broad reform to the structure of policy costs and levies may be economically difficult, even if there is cross-party support for lowering industrial energy costs. The British Industrial Competitiveness Scheme (BICS) is a useful example of how government may choose to act more targeted, focusing support on energy-intensive industries where high electricity costs have the greatest impact on competitiveness and investment decisions. Future changes could reveal how ministers intend to balance industrial support with wider energy policy objectives.

Grid reform could prove just as important as energy price policy. Lengthy connection queues continue to delay industrial electrification, on-site generation and EV charging projects. Without faster access to network capacity, investment risks being slowed at precisely the point government is seeking to accelerate growth and reindustrialisation.

All of this will need to sit alongside the UK's wider net zero ambitions. While policy mechanisms may change, the broader direction of travel remains clear. The focus is now on delivering affordability and regional economic growth in a way that also delivers on the UK’s decarbonisation targets.

Looking ahead

The new administration inherits many of the same energy challenges faced by the previous Labour government. Affordability, competitiveness, infrastructure investment and decarbonisation remain closely connected, and progress in one area often depends on action in another.

Detailed policy changes will take time to emerge, with the Autumn Budget and expected 10-year plan likely to provide greater clarity on industrial strategy, energy infrastructure and wider market reforms. For major energy users, the next few months should provide a clearer view of how government plans to balance affordability, growth and decarbonisation. Those decisions could shape energy costs, investment opportunities and operational strategy for years to come.

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