Energy was front and centre of John Healey’s first Budget as Chancellor. With the Middle East conflict pushing up wholesale prices, the government declared cheaper energy its first priority. The headlines were about households, but the OBR’s costings show several changes that matter just as much to business energy buyers. Highlights:
- Carbon Price Support is being abolished from April 2027. This tax on fossil-fuel power generation feeds through to wholesale electricity prices, so removing it should ease power costs for every business, not just households.
- The Treasury will fund cuts to Contracts for Difference (CfD) levies. Together with the end of Carbon Price Support, this costs around £0.4bn a year. The OBR says both are designed to offset the rise in electricity bills that non-energy-intensive businesses would otherwise face from funding BICS and the Supercharger uplift.
- Green levies are lower, not gone. Despite the 'levies off bills' rhetoric, the OBR still forecasts environmental levies of £14bn this year, rising to £16bn by 2031-32. That’s around £1.2bn a year less than forecast in March.
- BICS is confirmed and funded. Around 10,000 electricity-intensive manufacturers will see electricity bills cut by up to 25% from April 2027, with backdated support for 2026-27 paid in 2027-28.
- Household relief continues. VAT on domestic electricity stays at 0% until July 2027, households in council tax bands A–D in England get a £100 rebate in 2027, and Ofgem will be asked to fold household gas standing charges into the unit rate in 2027 or as soon as possible after. Electricity standing charges stay for now.
- Policy costs face tighter control. A new 'cost control framework' will scrutinise future levies and the planned Gas Shipper Obligation (a levy to fund hydrogen) has been scrapped.
What Businesses Should Watch
The OBR’s October 2026 Economic and Fiscal Outlook is blunt: interest rates and energy prices have both risen significantly since March. Key points:
- Wholesale prices peak this winter, then ease. The OBR assumes gas reaches around 150p a therm by the end of 2026, more than double its March forecast, before falling to around 95p by late 2027 and under 70p from mid-2028. Wholesale electricity peaks at around £125/MWh this winter, then drops below £70/MWh from mid-2028.
- But the risk is to the upside. The OBR notes that oil and gas futures have risen further since it set its assumptions and were near the top of their post-conflict range when the report was finalised. Its higher-price scenario adds £17bn to borrowing in 2027-28.
- Growth slows sharply next year. GDP grows around 1¼% in 2026, then just 1% in 2027, about half a percentage point below the March forecast. Expect softer demand right as many contracts come up for renewal.
- Inflation and interest rates stay higher for longer. CPI inflation is forecast at 3½% in 2027 (against 2% expected in March), with Bank Rate rising to just over 4¼% by mid-2027. That makes financing capital projects more expensive.
- The fiscal buffer is thin. The main fiscal rule is met by £15bn in 2029-30, with borrowing at 4.2% of GDP this year and debt interest £14bn a year higher on average than in March. There’s little room for fresh energy support if prices spike again.
- Gas still sets the power price, but less than it did. The OBR highlights that electricity prices are gradually decoupling from gas as renewables grow, which is why its medium-term power price forecast has actually fallen since March.
What This Could Mean For Your Business
Expect a modest lift from April 2027, not a step change.
Scrapping Carbon Price Support and trimming CfD levies should take some cost out of business electricity bills from April 2027. But with environmental levies still forecast at £14–16bn a year, non-domestic bills will keep carrying policy costs. The CBI points out that UK non-domestic electricity prices already sit around 45% above the G7 median. Check how your contract deals with these changes to pass-through costs in order to understand the timing of the impact.
Winter wholesale risk hasn’t gone away.
None of today’s measures touch the wholesale price, which is still being driven by the Middle East. Businesses aren’t covered by the price cap, so exposure depends entirely on your procurement strategy. If you’re buying on a flexible basis, review all future hedge positions and have a strategy that's fit for purpose today. If your fixed contract is renewing now, consider length of the contract you sign and understand the risks associated.
Manufacturers: BICS is real money, so make sure you claim it.
Up to 25% off electricity bills from April 2027, backdated to April 2026, is a material saving for eligible sites. Eligibility is targeted: you need to be in a qualifying frontier or foundational sector, manufacture an eligible product and use at least 33 MWh of grid electricity per site each year. Only grid-supplied electricity counts, and your business must be registered on Companies House. Applications close at 11:59pm on 30th November 2026 and can’t be amended once submitted, so check your eligibility now rather than discovering later that you qualified. We can check your BICS eligibility and apply for you.
Hospitality, retail and leisure: check your business rates.
In England, the small business rates relief threshold for these sectors rises from £12,000 to £18,000, and rates for other properties in these sectors are frozen in real terms for two years from April. It’s not an energy measure, but it eases overall cost pressure for many of the sites with the highest energy spend per pound of turnover.
Standing charge reform will shift costs, not just cut them.
The planned change covers household gas only, and electricity standing charges stay for now. Even so, it signals a wider move from fixed charges towards unit rates. If that thinking reaches business tariffs, high-consumption sites could pay more per unit even as fixed costs fall. Understanding your consumption profile, and where you can cut or shift load, becomes more valuable.
Why This Matters
This Budget marks a genuine shift: cost now leads energy policy, and the Treasury has started picking up some of the policy costs that used to land on bills.
That’s welcome, but it creates a period of uncertainty. Levy structures are changing, standing charges are being rethought and support schemes like BICS are targeted rather than universal. Each change will land differently depending on your sector, your contracts and how you use energy.
The businesses that come out ahead won’t be the ones waiting for Westminster to fix their bills. They’ll be the ones who know exactly what they pay, why they pay it, and which levers they can pull today. Clear data, smart procurement and investments that pay for themselves are what turn a volatile market into a manageable one.
What To Watch For Next
- Levy changes reaching business bills. How the end of Carbon Price Support and the CfD levy cuts flow through to business tariffs from April 2027, and whether the cost control framework takes more policy costs off bills.
- Winter wholesale prices. The OBR expects gas to peak around 150p a therm this winter, but futures were already near the top of their range when it finalised its forecast.
- The shape of the cost control framework. How tightly future levies are controlled will affect long-term electricity costs and the case for electrification.
- BICS payments and eligibility checks. Applications close at 11:59pm on 30th November 2026. Bill reductions start from April 2027, with a backdated payment covering April 2026 onwards.
- Ofgem’s standing charge work. Domestic reform comes first, but watch for any read-across to business tariffs.
- Interest rates. With the OBR assuming Bank Rate rises to just over 4¼% by mid-2027, financing capital projects is unlikely to get cheaper soon.
Want to know what the Budget means for your energy costs, your contracts and your eligibility for BICS? Book a call with our team and let’s map out your next move.