Budget action needed as retailer energy costs rise £400m
Retailers face a £440m increase in electricity costs this year, despite their energy use remaining virtually unchanged, a new report by the British Retail Consortium (BRC) reveals. The trade body has raised concern that this will feed directly into consumer prices, raising the cost of living for millions of families.
The industry report, Counting the Cost: The Growing Burden of Energy NCCs on Retail, shows electricity costs are expected to rise from £2.72bn in 2025 to £3.16bn in 2026, an increase of 16% in just one year. Much of this rise is being driven by growing Non-Commodity Charges (NCCs) – the government-driven costs added to electricity bills, rather than global energy prices.
These charges, which include government levies and rising and volatile network costs, now typically make up around two-thirds of retailers’ electricity bills. Transmission Network Use of System charges alone are expected to rise by 72%, adding almost £200m to bills.
Retail is one of the UK’s major energy-using industries and, following substantial investment in decarbonisation, around 90% of the industry’s energy use now comes from electricity. This leaves retailers particularly exposed to rising electricity costs, with recent volatility in energy prices following conflict in the Middle East adding further pressure.
The increase comes as retailers face a wider squeeze from rising costs. The industry has already been hit by £6.5bn in additional employment costs over the past two years, including higher employer National Insurance contributions, above inflationary increases to the National Living Wage and other employment-related costs.
Retailers have absorbed as much of these additional costs as possible to protect customers. But with margins already extremely tight, the continued rise in electricity and employment costs is making it increasingly difficult to do so without putting further pressure on prices at the till.
This is particularly challenging for energy-intensive parts of the industry, including food retail, where higher electricity costs risk adding to inflationary pressures at a time when household budgets remain stretched.
The BRC is warning that these charges directly impact consumer prices, and has highlighted some of the steps government could take to help ease the pressure:
- Extend eligibility for energy cost relief schemes, including future industrial competitiveness programmes, to electricity-intensive retailers.
- Remove renewable energy policy costs from electricity bills, and instead fund them centrally.
- Reform the recovery of renewable levies and system charges, to reduce pressure on electricity bills.
- Improve the predictability and stability of network charges, particularly transmission costs.
Helen Dickinson, chief executive of the British Retail Consortium, said: “Retailers’ energy bills continue to push up the price of everyday essentials for shoppers everywhere. With another £440 million increase this year despite their energy use barely changing, the chancellor must take action to reduce the plethora of policy levies, as well as stabilise the predictability of network charges that are driving up the cost of energy. Doing so would ease pressure on retailers, giving them breathing space to invest in keeping prices down for households and keeping people in jobs.”