Industrial strategy promises lower energy costs

The government has said that its Modern Industrial Strategy will tackle two of the biggest barriers facing UK industry - high electricity prices and long waits for grid connections.

UK industry currently pays some of the highest electricity prices in the world and businesses looking to expand have faced delays in connecting to the power grid.

As part of the Industrial Strategy, a 10-year plan to promote business investment and growth and make it quicker, easier and cheaper to do business in the UK, from 2027 a new British Industrial Competitiveness Scheme will reduce electricity costs by up to £40 per megawatt hour for over 7,000 electricity-intensive businesses in manufacturing sectors like automotive, aerospace and chemicals, the government said.

These firms - which support over 300,000 jobs - will be exempt from levies such as the Renewables Obligation, Feed-in Tariffs and the Capacity Market. The details - including eligibility – will be set out following a consultation which is due to be launched shortly. The government said it will also increase support for the most energy-intensive firms — including steel, chemicals, and glass makers — by covering more of their electricity network charges through the British Industry Supercharger.

These businesses currently get a 60% discount on those charges, but from 2026, that will increase to 90%. The government said will help around 500 eligible businesses in sectors such as steel, ceramics and glass reduce their costs. The government will also deliver a new Connections Accelerator Service – due to be operating by the end of 2025 - to streamline grid access for major investment projects which will prioritise projects that create high-quality jobs and deliver significant economic benefits.

New powers in the Planning and Infrastructure Bill, currently before parliament, could also allow the government to reserve grid capacity for strategically important projects.  

The Industrial Strategy focuses on eight potentially high-growth sectors of UK business including Advanced Manufacturing, Clean Energy Industries, Creative Industries, Defence, Digital and Technologies, Financial Services, Life Sciences, and Professional and Business Services. Each growth sector will have a bespoke 10-year plan that will attract investment and enable growth.

Chancellor of the Exchequer Rachel Reeves said: “Today’s Industrial Strategy builds on that progress with a ten-year plan to slash barriers to investment. It’ll see billions of pounds for investment and cutting-edge tech, ease energy costs, and upskill the nation. It will ensure the industries that make Britain great can thrive. It will boost our economy and create jobs that put more money in people’s pockets.”

As well as these changes on industrial energy costs, the Industrial Strategy will also include increasing British Business Bank financial capacity to £25.6 billion, including an additional £4bn for Industrial Strategy Sectors “By investing largely through venture funds, the BBB will back the UK’s most high-growth potential companies,” the government said. Also included in the new Industrial Strategy is an extra £1.2 billion each year for skills by 2028-29, and moves to attracting elite global talent to key sectors, via visa and migration reforms and the new Global Talent Taskforce.

SCI has long been calling for a comprehensive industrial strategy that champions science-based businesses, and launched its own Manifesto for an Industrial Science and Innovation Strategy with recommendations that include establishing an Innovation & Science Growth Council with a direct reporting line to the Prime Minister, reforming pension funds to encourage investment in start-ups to commercialise their innovations in the UK and simplifying the overly complex R&D tax relief system. With this sort of support, SCI has said the UK should aim to see 15 start-ups scaling to £500m, five unicorns listing in the domestic market, and ten investments of £500m+ being made in manufacturing - all by 2030.

So far, plans for five sector plans have been published:

Advanced Manufacturing will see up to £4.3 billion in funding, including up to £2.8 billion in R&D over the next five years, with the aim of anchoring supply chains in the UK - from increasing vehicle production to 1.35 million, to leading the next generation of technologies for zero emission flight.

Clean Energy Industries will see a further £700 million invested in clean energy supply chains, taking the total funding for the Great British Energy Supply Chain fund to £1 billion. Creative Industries will get a £380 million boost for film and TV, video games, advertising and marketing, music and visual and performing arts.

Digital and Technologies will see more than £2 billion used to drive the AI Action Plan, including a new Sovereign AI Programme, £187 million for training one million young people in tech skills and targeting R&D investment at frontier technologies.

The Professional and Business Services plan will focus on adoption of UK-grown AI and working to secure mutual recognition of professional qualifications agreements overseas.

The Defence, Financial Services and Life Sciences sector plans are due to be published shortly.

Earlier this month a report from the House of Commons Business and Trade Committee warned that a “once in a century” chance for the UK’s economy would be lost unless the new Industrial Strategy properly tackled the issue of industrial energy costs. It also waned that growth is being held back by poor public procurement; a chronic skills gaps; blocks to commercialisation of innovation; trouble accessing scale-up finance and over-centralised decision-making.