Energy costs to be cut for industry as Starmer seeks economic ‘turning point'
The plan, which could cut bills by up to 25%, forms a key part of Sir Keir Starmer's 10-year industrial strategy which he hopes will address stuttering economic growth and transform the business landscape.
The Prime Minister said the plan marks a 'turning point for Britain's economy' by supporting key industries where there is potential for growth.
Prime Minister Sir Keir Starmer said the plan would offer long-term certainty for key industries (Andy Buchanan/PA)
Manufacturers have warned 'crippling' power costs are far higher for UK businesses than competitors overseas.
From 2027, a new British Industrial Competitiveness Scheme will cut costs by up to £40 per megawatt hour for over 7,000 manufacturing firms by exempting them from levies on bills including the renewables obligation, feed-in tariffs and the capacity market.
Around 500 of the most energy-intensive firms, including the steel industry, chemicals and glassmaking, will also see their network charges cut – they currently get a 60% discount through the British Industry Supercharger scheme, which will increase to 90% from 2026.
The plan also promises measures to speed up the time it can take to connect new factories and projects to the energy grid.
Sir Keir 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.'
He said the decade-long plan would deliver 'the long-term certainty and direction British businesses need to invest' during an 'era of global uncertainty'.
Energy Secretary Ed Miliband blamed 'our reliance on gas sold on volatile international markets' for the high electricity costs for businesses.
He said 'doubling down' on wind and nuclear power would 'bring down bills for households and businesses for good'.
The industrial strategy focuses on eight areas where the UK is already strong and there is potential for further growth: advanced manufacturing, clean energy, creative industries, defence, digital, financial services, life sciences and professional and business services.
Plans for five of the sectors will be published on Monday, but the defence, financial services and life sciences strategies will come later.
Other measures include:
– Increasing the British Business Bank's financial capacity to £25.6 billion, including £4 billion for sectors in the industrial strategy.
– Raising research and development spending to £22.6 billion a year by 2029/30.
– An extra £1.2 billion a year for skills by 2028-29 to train Britons to do jobs in growth industries and reduce reliance on foreign workers.
– Attracting 'elite' overseas talent through visa and migration reforms.
– Cutting the administrative cost of red tape by 25% and reducing the number of regulators.
– Reducing the time it takes to get planning permission by hiring more planners, streamlining pre-application requirements and combining environmental obligations.
– Increasing the supply of locations for investment around the country with a £600 million strategic sites accelerator.
Energy Security and Net Zero Secretary Ed Miliband said relying on gas from volatile markets had driven costs sky-high for businesses (Kin Cheung/PA)
The strategy comes after the latest figures indicated the economy shrank by 0.3% in April, the biggest monthly contraction in gross domestic product for a year-and-a-half, as businesses felt the impact of Donald Trump's tariffs and domestic pressure as a result of hikes to firms' national insurance contributions.
There are also concerns in industry about the impact of the Government's Employment Rights Bill, which could add to business costs.
Confederation of British Industry chief executive Rain Newton-Smith said: 'More competitive energy prices, fast-tracked planning decisions and backing innovation will provide a bedrock for growth.
'But the global race to attract investment will require a laser-like and unwavering focus on the UK's overall competitiveness.'
Manufacturers' organisation Make UK's chief Stephen Phipson said the three major challenges facing industry were 'a skills crisis, crippling energy costs and an inability to access capital for new British innovators', and the strategy 'sets out plans to address all three'.
TUC general secretary Paul Nowak said: 'We welcome ministers taking action to reduce sky-high energy costs for manufacturers – something unions have been calling for as a matter of urgency.
'For too long, UK industry has been hamstrung by energy prices far above those in France and Germany. It's made it harder to compete, invest, and grow.'
Acting shadow energy secretary Andrew Bowie said: 'It is astonishing that Labour are finally admitting that the costs of net zero are so high that they're having to spend billions of pounds of taxpayers' money subsidising businesses' energy bills to stop them going bust.'
Shadow business secretary Andrew Griffith has written an open letter to firms warning they are being 'sleepwalked into disaster' by the Employment Rights Bill.
He said: 'When it comes to business, it's actions, not words, which count, but this Government is stepping on the accelerator and the brake at the same time.'
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