Households and businesses will have to wait for energy bills to fall significantly because “there’s no shortcut” to bringing down prices, the energy minister has told Sky News.

Speaking as Chancellor Rachel Reeves considers ways of easing the pressure on households in next week’s budget, energy minister Michael Shanks conceded that Labour’s election pledge to cut bills by £300 by converting the UK to clean power has not been delivered.

It comes as Ofgem announced the average annual energy bill will rise by 0.2% in January, despite wholesale costs falling.

Major forecasters Cornwall Insight had predicted a 1% drop – but the energy regulator has moved in the opposite direction. Between January and March, the typical annual dual fuel bill will be £1,758 – up from the current £1,755 cap.

The UK has the second-highest domestic and the highest industrial electricity prices among developed nations, despite renewable sources providing more than 50% of UK electricity last year.

“The truth is, we do have to build that infrastructure in order to remove the volatility of fossil fuels from people’s bills,” Mr Shanks said.

“We obviously hope that that will happen as quickly as possible, but there’s no shortcut to this, and there’s not an easy solution to building the clean power system that brings down bills.”

His comments come amid growing scepticism about the compatibility of cutting bills as well as carbon emissions, and growing evidence that the government’s pursuit of a clean power grid by 2030 is contributing to higher bills.

While wholesale gas prices have fallen from their peak following the Russian invasion of Ukraine in 2022, energy bills remain around 35% higher than before the war, inflated by the rising cost of reducing reliance on fossil fuels.

The price of subsidising offshore wind and building and managing the grid has increased sharply, driven by supply chain inflation and the rising cost of financing major capital projects.

In response, the government has had to increase the maximum price it will pay for offshore wind by more than 10% in the latest renewables auction, and extend price guarantees from 15 years to 20.

The auction concludes early next year, but it’s possible it could see the price of new wind power set higher than the current average wholesale cost of electricity, primarily set by gas.

Renewable subsidies and network costs make up more than a third of bills and are set to grow. The cost of new nuclear power generation will be added to bills from January.

The government has also increased so-called social costs funded through bills, including the warm home discount, a £150 payment made to around six million of the least-affluent households.

Gas remains central to the UK’s power network, with around 50 active gas-fired power stations underpinning an increasingly renewable grid, and is also crucial to pricing.

Because of the way the energy market works, wholesale gas sets the price for all sources of electricity, the majority of the time.

At Connah’s Quay, a gas-fired power station run by the German state-owned energy company Uniper on the Dee estuary in north Wales, four giant turbines, each capable of powering 300,000 homes, are fired up on demand when the grid needs them.

Energy boss: Remove policy costs from bills

Because renewables are intermittent, the UK will need to maintain and pay for a full gas network, even when renewables make up the majority of generation, and we use it a fraction of the time.

“The fundamental problem is we cannot store electricity in very large volumes, and so we have to have these plants ready to generate when customers need it,” says Michael Lewis, chief executive of Uniper.

“You’re paying for hundreds of hours when they are not used, but they’re still there and they’re ready to go at a moment’s notice.”

He agrees that shifting away from gas will ultimately reduce costs, but there are measures the government can take in the short term.

“We have quite a lot of policy costs on our energy bills in the UK, for instance, renewables incentives, a warm home discount and other taxes. If we remove those from energy bills and put them into general taxation, that will have a big dampening effect on energy prices, but fundamentally it is about gas.”

The chancellor is understood to be considering a range of options to cut bills in the short term, including shifting some policy costs and green levies from bills into general taxation, as well as cutting VAT.

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Tories and Reform against green energy

Stubbornly high energy bills have already fractured the political consensus on net zero among the major parties.

Under Kemi Badenoch, the Conservatives have reversed a policy introduced by Theresa May. Shadow energy secretary Claire Coutinho, who held the post in the last Conservative government, explained why: “Net zero is now forcing people to make decisions which are making people poorer. And that’s not what people signed up to.

“So when it comes to energy bills, we know that they’re going up over the next five years to pay for green levies.

“We are losing jobs to other countries, industry is going, and that not only is a bad thing for our country, but it also is a bad thing for climate change.”

Reform UK, meanwhile, have made opposition to net zero a central theme.

“No more renewables,” says Reform’s deputy leader Richard Tice. “They’ve been a catastrophe… that’s the reason why we’ve got the highest electricity prices in the developed world because of the scandal and the lies told about renewables.

“They haven’t made our energy cheaper, they haven’t brought down the bills.”

Mr Shanks says his opponents are wrong and insists renewables remain the only long-term choice: “The cost of subsidy is increasing because of the global cost of building things, but it’s still significantly cheaper than it would be to build gas.

“And look, there’s a bigger argument here, that we’re all still paying the price of the volatility of fossil fuels. And in the past 50 years, more than half of the economic shocks this country’s faced have been the direct result of fossil fuel crises across the world.”

Housing Secretary Steve Reed wants Britain to “build, baby, build” towards the government’s flagship 1.5 million homes target by the next election. But housebuilding in England has slowed to its lowest level in nine years, with the number of homes built falling by 6% to 208,600 in the year to March 2025.

A combination of rising building costs and weakening house prices has left “half of the country unviable (for development projects) and the other half of the country unaffordable”, Steve Turner, executive director of the Home Builders Federation (HBF), told Sky News.

Ambitions for affordability are competing with high safety and design standards, which have been pushing up costs.

The government acknowledges housing delivery has not reached required levels – but maintains building will ramp up as their policies come into effect.

Since the election, 275,000 homes have been delivered to date, compared to the 400,000 that would have needed to be on track for 1.5 million homes.

“Additional housing is now at around 200,000 homes a year and is at best flatlining. We’re still some way away from where the government wants to get to, to meet the nation’s housing need,” Mr Turner said.

The rising price of materials and labour have contributed to the increase in the cost of building homes in recent years – for example, the cost of bricks and clay products increased by over 26% in the year to August 2023.

At the same time, higher interest rates since 2022 have increased the cost of financing development, in addition to weakening buyer demand, as mortgage rates have soared.

As a result, the sales value of homes has not kept pace, eating into profit margins in a trap described as the “jaws of death” by housing developers.

While the cost of building homes has increased by just under 13% on average since September 2022, house prices have increased by less than 3% on average across Britain, while flat prices in London have decreased by 0.5%.

The government is currently consulting on emergency measures to “get spades in the ground” in London after the number of new homes starting construction in the capital plummeted to just 4,000 in the latest year to June 2025 – a fraction of the area’s 81,000 building target.

These include a funding package and temporary reductions in affordable housing targets from 35% to 20%, as well as relief from some levies.

Housebuilders have also faced increased costs from updated building design standards introduced from 2022 onwards, including fire safety rules mandating a second fire escape stairwell for tall buildings, and regulations to improve energy efficiency, ventilation, and electric vehicle infrastructure.

The greatest impact is in London. High-rise housing is more common, and additional Greater London Authority regulations require more affordable housing and additional requirements such as “dual aspect” design.

A recent report by Savills estate agency and property developers Ballymore estimates that delivering homes in Greater London now costs 10-15% more than elsewhere, thanks to these requirements.

Property developers told Sky News that new building and fire safety regulations add costs of around £21,500 per home for a two-bedroom flat in London, while community infrastructure levies add £12,000 on average and can be as high as £50,000 in some areas. New costs – a 4% residential development tax and a building safety levy costing between £1,500 and £3,500 per home – are expected to be added in the near future.

“The viability of sites is very, very strained and is snuffing out general supply of new homes from the UK’s housing pipeline,” Nick Cuff, managing director of real estate advisory and development business Urban Sketch, told Sky News.

“We’re just not funding these things properly, and we’re asking the private sector to pick up the bill in almost all cases. We are effectively seeing a cessation in development activity because it cannot support the requirements that government is placing on it now. And that’s why the numbers have dropped off a cliff in the last two years,” he added.

Affordable social housing is mostly built by private developers through a cross-subsidy model, which requires private housebuilding to be viable as well.

While some are hoping for emergency measures in London to be made permanent, others are wary of a race to the bottom.

“If at the first test, you pull back on the [affordable homes] target, what message are you sending? It must be temporary – we need to see if it does then move the market,” Rachael Williamson, director of policy, communications and external affairs at the Chartered Institute of Housing (CIH), told Sky News.

“We’ve got to manage the tension [between safety and costs] without saying ‘let’s cut corners’. History tells us where you get to with that,” she added.

Outside of London

Though these issues have been particularly fraught in London, the rest of the country also faces significant challenges.

Analysis by online property portal Zoopla finds it is now not viable to build in just under half of England, on the basis that the sales value of homes is less than the total cost of delivering a new home.

The analysis excludes figures for London, though research firm Molior separately found that housebuilding in half of London would be unviable even if housing and infrastructure contribution requirements were completely removed.

They also found that those areas where building is viable are the areas where people were less likely to be able to afford to buy, creating a mismatch between supply and demand.

The viability to develop new homes is better in the south of England, where new build prices are among the most unaffordable for buyers.

Although planning reforms have been “very positive”, Mr Turner said it only addresses one side of the equation, and that the government “needs to find a way to support buyers, which will then create confidence with house builders that ultimately they can sell the product they deliver”.

There is currently no suggestion that the government intends to revive a version of the Help to Buy scheme, which critics have argued contributed to increasing house prices and reducing affordability in the long run.

Long-term planning needed

Speculation around the upcoming budget has also added to uncertainty, and developers have called on the government to rethink proposed landfill tax changes, which would further add to building costs.

“We’ve definitely seen an increase in regulation over the last few years. Often very well-meaning regulation, but which can hinder the viability of sites and developments,” a spokesperson for the homebuilder Barratt Redrow told Sky News.

“We buy land on the basis of the costs of construction, including the regulatory burden, at the time, and obviously, if four years later, when we’ve got planning permission, it’s more expensive to build, then that is going to have an impact on whether it makes financial sense to go ahead with the development,

“As an industry and also as a business, we’re not against the right sort of regulation, but it’s important we’ve got long-term certainty because the process of buying land and building houses is so long and involves such risk,” he added.

Housing Secretary Steve Reed said: “Today’s statistics show, in the clearest terms yet, the extent of the housing crisis we inherited and are now fixing.

“We took over a planning system that blocked rather than built, and high inflation and soaring construction costs that created a perfect storm holding back housebuilding.

“Our 1.5 million homes target is not just a number – it’s a way to give children a secure home, for young people finally to move out and enjoy independence, and for working families to have a place to call their own.

“We have already taken down the barriers that stopped this country from building, overhauled the planning system and pumped record investment into social housing. This will bring about the change we need to end the housing crisis by getting spades in the ground wherever homes are needed most.”

Development ‘hit by a perfect storm of costs’

A spokesperson for the Mayor of London said: “Through the London Plan, the mayor has been able to set the highest housing design standards relative to other parts of the country, and these standards have supported the delivery of high-quality homes in London

“However, London needs more sites coming forward to meet the capital’s housing needs, and development has been hit by a perfect storm of costs from national policy and wider economic conditions that disproportionately affects London.

“Through our proposed changes to London Plan design guidance, we are hoping to reduce the barriers to housebuilding and introduce flexibility so that planning policies are applied in line with their original intent – helping to bring developments forward. These measures will help to unblock stalled building sites, giving the mayor stronger levers to approve homes and bring forward thousands of homes more quickly.”

The Data x Forensics team is a multi-skilled unit dedicated to providing transparent journalism from Sky News. We gather, analyse and visualise data to tell data-driven stories. We combine traditional reporting skills with advanced analysis of satellite images, social media and other open source information. Through multimedia storytelling we aim to better explain the world while also showing how our journalism is done.

The world’s most valuable company has reported another series of expectation-beating results, heading off fears of the AI bubble bursting for now.

Nvidia’s revenue reached $57bn in the three months to October, higher than Wall Street estimates and the company’s own guidance.

That’s up 62% on the same time last year, and has been described by the business as an “outstanding” quarter.

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A profit measure called earnings per share was also better than expected at $1.30.

It matters as Nvidia has powered the artificial intelligence (AI) boom through its computer chips, which are key parts in AI chatbots such as ChatGPT.

Nvidia has major tech companies as clients and acts as a good proxy for whether the tens of billions of dollars invested in AI is paying off.

Its chief executive, Jensen Huang, has been described as the Godfather of AI and watch parties were organised for those looking to follow the Wednesday evening announcement.

The company has been a massive beneficiary of the push to put money into AI, with its share price reaching stratospheric highs.

In October, it became the first worth $5trn (£3.83trn), about the size of the German economy, Europe’s largest, and double the UK’s benchmark stock index, the FTSE 100.

What’s been announced?

Revenue from data centres reached a record high of $51.2bn, more than £10bn higher than the three months previous.

The outlook is for continuing strong sales in the final three months of the financial year, as the company forecasts revenue will be roughly $65bn.

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Demand for Nvidia products continues to surpass expectations, while the business is “still in the early innings” of AI transitions, its chief financial officer Colette Kress said.

Mr Huang said sales of its blackwell chips are “off the charts” and its cloud graphics processing chips (GPUs) are “sold out”.

Why it matters

Developing AI infrastructure, like the construction of data centres, has been a significant contributor to US economic growth, as measured by gross domestic product (GDP).

A faltering of AI expansion, therefore, impacts the US economy, the world’s largest, which in turn affects the UK and global economies.

Anxiety around the massive valuations tech companies have accrued, on the hope of AI revolutionising the world, is likely to be staved off by the results announcement.

A fall in these tech company valuations could have meant a drop in the value of pension pots or savings.

Just seven dominant tech companies, many of which have borrowed to invest in AI, make up more than a quarter of major US stock index, the S&P 500.

In the last year alone, Nvidia’s share price has risen more than 230%.

Some, including US trader Michael Burry, famous for being played by Christian Bale in the Hollywood film The Big Short, have effectively bet that Nvidia’s share price would fall.

Addressing the topic of an AI bubble, Nvidia’s founder, Mr Huang, said, “From our vantage point, we see something very different”.

What next?

Regardless of the figures released on Wednesday evening, significant market moves were anticipated, given the attention paid to the results and the significance of the company.

Nvidia shares rose as much as 4% in after-hours trading.

The results also boosted the share price of its chip-making competitors like Broadcom and Advanced Micro Devices.

For now, the AI bubble remains intact.