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A quarter of the average UK energy bill was funding corporate profits last year, according to analysis that reveals the hidden cost of privatising some of the UK’s key industries.
The study – part of a wider Who Owns Britain project by the Common Wealth thinktank – found that a sum equal to 24.2% of the average energy bill went to the pre-tax profits of the major electricity generators, networks and household suppliers in 2024.
In addition, the analysis reveals the scale of wealth extracted from bill payers since the privatisation of Britain’s energy system. It found that shareholders of Britain’s privatised energy companies have taken at least £70.7bn in dividend payouts between 2010 and 2025, rather than reinvesting that money or reducing bills.
Mathew Lawrence, director of Common Wealth, said the public was paying a high price for the “privatisation premium”.
“They are lumped with higher energy bills that fund billions of pounds of shareholder payouts. That money should be invested to build homegrown clean power and help reduce costs.”
The analysis found that £416 of the average bill of £1,719 was taken as pre-tax profits by the major electricity generators, networks and household suppliers last year.
It also calculated that the energy networks that distribute gas and electricity to the UK’s homes and businesses had a profit margin of 55% between 2020 and 24, compared with a FTSE 350 average of 14%.
Chris Hayes, the Common Wealth chief economist, said the UK’s energy system was unfit for the challenges the country faced amid an escalating climate emergency and cost of living crisis.
“Networks running natural monopolies have systematically underinvested in maintenance and expansion. A splintered retail sector has allowed generators to capture windfall profits. Meanwhile, our clean energy investment regime has been blown apart by the last few years of economic uncertainty. Public investment and vertical reintegration are desperately needed to overcome these challenges.”
The study calculates that in the era of public ownership, investment in the energy system was twice as high relative to GDP as under the privatised era, helping deliver what the report describes as a period of “innovation and ambition, when Britain led the world in new nuclear power, rapidly rolled out the modernised ‘Supergrid’ and built the world’s first ocean-receiving LNG terminal at Canvey Island”.
The privatisation of the energy sector was a key plank of the Tory government’s broader policy of reducing state involvement in the economy during the 1980s and 1990s.
Supporters argued it increased efficiency, improved choice and attracted private investment – therefore reducing the burden on the state.
However, the Common Wealth report found that investment and innovation have stalled, bills have gone up and tens of billions of pounds have been taken from hard-pressed consumers and given to shareholders and corporations.
Sandy Hager, from the University of London, said energy was not a luxury but “the lifeblood of our economy and daily lives”.
“Households face soaring bills, over a quarter of which now goes to company profits, while investment has withered. If we’re serious about energy security and decarbonisation, the model is indefensible. We need an energy system organised around the public good, not shareholder dividends, which means bringing our networks and generation into public hands.”
The analysis found that the nine largest electricity generators that account for two-thirds of total UK electricity generation, and the energy networks which transport electricity and gas from generators to homes and businesses, made £17.8bn in operating profits in 2023 – £10.4bn for generation; £7.4bn for networks.
The analysis found that much of this profit was going to servicing company debt and shareholder payments rather than investment.
In 2023, the last fully reported financial year for the companies analysed, they spent a total of £8.02bn on dividends, buybacks, and interest payments, of which £3.8bn came from the generation companies and £4.2bn came from the networks. This amounted to 9% of the typical 2023 energy bill.
The report argues that money from bills – which leaks out of the energy system as dividends and expensive debt servicing – should be reinvested to build clean and affordable homegrown power.
A spokesperson for the energy regulator, Ofgem, said it regulated the energy market to “ensure that any costs passed on to consumers are fair and accurate, and that the sector isn’t making excessive profits”.
They added: “We also work hard to bear down on costs while attracting the investment needed to upgrade the system and move away from volatile international markets that drive the fluctuations in energy bills we’ve seen in recent years.”
They said Ofgem had collected almost £500m “in payments from energy companies for not meeting our rules”.
Lawrence Slade, the CEO of ENA, which represents the UK’s electricity network operators, said: “The £100bn of private investment made by network operators into the future of the UK’s energy grid to deliver the government’s clean power 2030 targets comes with regulated returns of 5% per year. This investment ensures the UK has the clean, secure and affordable energy it requires in the years ahead, money that UK taxpayers would otherwise need to find, whilst also maintaining one of the most safe, stable and resilient energy grids anywhere.
“Cherrypicking figures from annual accounts of major long-term UK infrastructure spending risks giving a misleading picture of investment that is essential to the UK’s clean energy future.”
In the UK, domestic prices were among the highest in Europe in the first half of 2024 and industrial users face some of the highest electricity prices in the world. Average household energy bills are now 63% higher than before the energy crisis.
A recent YouGov survey found 71% of the electorate backed public ownership of energy companies.
There are signs that the political consensus around privatisation is breaking down. The Labour government has established the publicly owned GB Energy and has completed the renationalisation of the grid, with the creation of the National Energy System Operator.
The new Green party leadership and the new Your party vehicle have both made public ownership of energy central to their agendas, and even rightwing Reform UK has called for the renationalisation of privatised utilities like water.
Lawrence said support for publicly owned power was “not about nostalgia”.
“It is a proven and effective tool – from our own past and in comparator economies today – to deliver a more affordable and effective clean energy future. As the consensus on the status quo fragments, just like in the past, whoever seizes the mantle of change will reap the rewards.”
Sophie Flinders, senior data analyst at Common Wealth, said the politics of energy was at “an inflection point”.
“Attacks on the cost of the transition are increasing,” she said. “But higher bills are the result of private economic power not renewable power. The best response is to deliver new era of public power based on more coherent, certain, and cost-effective investment. The political prize is great: reducing a key driver of the cost of living crisis, delivering more homegrown clean power, and renewing consent for an ambitious transition.”
