It's not easy being green: high energy costs threaten UK's net zero business endeavours

Missed decarbonisation targets, high prices and political uncertainty are seeing Labour's bid to make the nation a clean utility 'superpower' drift off into the ether.

- Jeevan Vasagar reports

When Rachel Reeves visited a heat pump manufacturer in Truro this summer, she posed for selfies with the team and described the business as crucial to transforming Britain into a “clean energy superpower”.

The company Kensa, last month announced redundancies for up to a fifth of its workforce, blaming “policy instability and market uncertainty.” It was a second round, following a 20% cut last year.

As political consensus over net zero breaks down, it's a bewildering time to be a green business in Britain. Reform has threatened to strike down contracts awarded under the latest auction round for renewable energy developers, while the Conservatives plan to scrap climate change legislation.

Meanwhile, high energy prices and uncertainty over Labour's green policies are rattling companies, prompting job cuts and a slow down in investment.

BMW has delayed plans to produce the all-electric Mini at its Oxford plant, citing “multiple uncertainties facing the automotive industry” and job losses at ceramics companies in Stoke-on-Trent have been blamed on high energy costs.

On the face of it, the adoption of clean technology looks rapid. Heat pump sales rose more than 60% year on year to around 98,000 in 2024, and EV sales reached a record high of over 380,000 cars, around a fifth of new car sales last year.

But behind the headline numbers there is disquiet about the pace of decarbonisation, given the scale of the change needed to shift the UK economy away from fossil fuels - the figures for heat pumps account for 6% of the overall boiler market and are a long way short of the official target set under the last government of 600,000 installations a year by 2028.

Both for industry and households, the UK has some of the highest electricity prices in the world. At consumer level, high power prices are a deterrent to installing heat pumps and shifting from petrol and diesel cars to EVs.