Starmer slashes net zero charges to save Britain's factories
Net zero taxes will be slashed for thousands of manufacturers as Sir Keir Starmer scrambles to save British industry from crippling electricity costs.
As part of the Government's long-awaited Industrial Strategy, the Prime Minister is to cut power bills by up to 25pc for some 7,000 'electricity intensive' manufacturers, including car makers, aircraft factories and chemical plants.
From 2027, they will no longer have to pay the net zero levies that are normally added to their power bills, such as the renewables obligation, the feed-in-tariff and capacity market charges.
This will be paid for by financial reforms to the energy market and a raid on companies that burn natural gas, through higher carbon taxes, the Government said.
However, the support was at risk of being diluted on Sunday as Iran's threat to cut off a vital oil and gas supply route in the Middle East risked sending energy prices around the globe soaring.
It comes after repeated warnings that British manufacturers are labouring under the highest industrial electricity prices of any developed country, with output down by a third since 2021.
Sir Keir's announcement was welcomed by manufacturers, including Derby-based Rolls Royce, as a 'giant and much needed step forward'.
The Prime Minister said: 'This Industrial Strategy marks a turning point for Britain's economy and a clear break from the short-termism and sticking plasters of the past.
'In an era of global economic instability, it delivers the long term certainty and direction British businesses need to invest, innovate and create good jobs that put more money in people's pockets as part of the plan for change.
'Our message is clear – Britain is back and open for business.'
The Government said its new support scheme is expected to save qualifying firms about £40 per megawatt hour (MWh). That would bring their costs closer to EU competitors.
According to data from the International Energy Agency, UK businesses paid an average of £258 per MWh for power in 2023 compared to £218 in Italy, £178 in France and £177 in Germany.
Companies in the US paid just £65 on average.
At the same time, support for traditional heavy industry businesses – such as steel makers, glass blowers and chemical producers – will also be beefed up further, meaning their savings will likely be even greater.
These firms already benefited from the so-called 'British Industrial Supercharger', which exempted them from various charges on their power bills.
But from next year, their discount on network charges will be increased from 60pc to 90pc.
The Government said the changes would cost an estimated £2bn over four years, or about £500m a year. But a spokesman insisted that it would not be paid for via extra charges on households, either through bills or taxes.
Instead it will be raised via energy market reforms such as changes to contracts for difference – subsidies used to support wind and solar farms – and higher carbon prices, which are levied on businesses for their carbon emissions.
However, with the support targeted at electricity prices, companies that use gas are likely to foot at least some of the bill through the higher carbon pricing that ministers have announced.
A spokesman for the business department added that 'energy market reforms' will also pay for the changes, including longer subsidy agreements with wind farms – aimed at bringing the overall cost for power down.
The changes would not mean lower funding for renewable energy schemes, the spokesman added.
Under the long-awaited Industrial Strategy, a centrepiece of Labour's economic plans, Sir Keir has also announced billions of pounds of extra support for key industries, investment in skills training, reduced red tape, higher research and development spending, and changes to migration and visa rules to attract 'elite global talent'.
This will see the British Business Bank's war chest for investment increase to £25.6bn, the Government said, with billions more ploughed into 'sector plans' for advanced manufacturing, clean power, creative industries, digital industries, and professional and business services such as law firms and consultants.
Mike Hawes, chief executive of the Society of Motor Manufacturers and Traders, said: 'The publication of an Industrial Strategy – one with automotive at its heart – is the policy framework the sector has long-sought and the Government has now addressed.
'The number one priority must be addressing the UK's high cost of energy, enabling the sector to invest in the technologies, the products and the people that will give the UK its competitive edge.'
Tufan Erginbilgic, chief executive of Rolls-Royce, one of Britain's biggest manufacturers, said: 'The UK Government's Industrial Strategy commitment to support our world-leading aerospace and nuclear industries shows long-term strategic foresight.'
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