UK Government Unveils Ten-Year Industrial Plan to Cut Energy Costs

The UK government is set to announce a comprehensive ten-year industrial strategy aimed at significantly reducing energy costs for over 7,000 businesses, potentially slashing bills by as much as 25%. This initiative, part of a broader plan to bolster economic growth, is scheduled for unveiling on Monday. Prime Minister Sir Keir Starmer has positioned the strategy as a pivotal moment for the UK economy, emphasizing its potential to support key industries with considerable growth prospects.

The government’s strategy includes the introduction of the British Industrial Competitiveness Scheme, which aims to reduce electricity costs by up to £40 per megawatt-hour for manufacturing firms by 2027. This will be achieved by exempting businesses from various levies currently applied to energy bills, including the renewables obligation and feed-in tariffs. Approximately 500 of the most energy-intensive sectors, such as steel, chemicals, and glassmaking, will also see their network charges reduced. The British Industry Supercharger scheme will increase discounts for these firms from 60% to 90% by 2026, a move welcomed by industry leaders as crucial for maintaining competitiveness against international counterparts.

According to Stephen Phipson, Chief Executive of Make UK, the strategy addresses three critical challenges faced by the industry: "a skills crisis, crippling energy costs, and an inability to access capital for new British innovators." Meanwhile, Paul Nowak, General Secretary of the Trades Union Congress, highlighted the long-standing issue of high energy prices in the UK compared to France and Germany, stating, "It’s made it harder to compete, invest, and grow."

The strategy also outlines plans to expedite the connection of new factories to the energy grid, which Prime Minister Starmer believes will provide businesses with the long-term certainty necessary for investment and job creation. The government aims to generate over one million new well-paid jobs within the next decade. Additionally, the plan includes a £1.2 billion annual investment in skills training by 2028-29, with an emphasis on attracting global talent through visa reforms.

Criticism of the plan has emerged from Conservative acting shadow energy secretary Andrew Bowie, who argues that the government must adopt a more serious approach to tackle the underlying causes of high energy prices rather than providing short-term subsidies. Bowie asserted that the costs of achieving net-zero emissions are so high that the Labour government is compelled to subsidize businesses to prevent insolvency.

The government’s strategy comes at a critical time, as recent figures indicated a contraction of 0.3% in the UK economy in April, marking its most substantial decline in 18 months. The announcement follows apprehensions voiced by business groups regarding the Employment Rights Bill, which they believe could further hinder economic growth during this uncertain period.

Chancellor Rachel Reeves articulated that the new industrial strategy would facilitate significant investments in cutting-edge technologies and workforce upskilling. In a bid to drive innovation, research and development spending is projected to increase to £22.6 billion annually by 2029-30, with a dedicated £2 billion allocation for artificial intelligence initiatives.

While the government is focusing on eight specific sectors for growth—advanced manufacturing, clean energy, creative industries, defense, digital technology, financial services, life sciences, and professional services—detailed plans for five sectors will be published on Monday, with the remaining sectors to be addressed later.

This strategic approach not only aims to reduce energy costs but also intends to bolster the UK's industrial capabilities and enhance its competitive edge on the global stage. As businesses anticipate the upcoming announcement, the implications of the government’s industrial strategy could significantly reshape the landscape of UK industry in the years to come.