UK industrial strategy aims to cut factory energy costs

LONDON — The U.K. government is readying a plan to slash the country’s crippling industrial energy costs so British manufacturers can better compete with global rivals.

Electricity prices for U.K. industry are 46 percent above the average for members of the International Energy Agency group of developed countries and four times higher than in the U.S, putting a big strain on British businesses regarding competitiveness.

However, according to three people briefed on the government’s plans, cutting high energy costs will be at the heart of a new industrial strategy expected early next week.

Alongside the strategy, which will prioritize growth across more than 30 industrial sectors, ministers will launch a consultation on “the structure of industrial electricity prices” to help cut running costs for factories and other manufacturing businesses.

As part of the consultation, ministers are expected to consider recent proposals from industry lobbyists to exempt manufacturers from environmental and other taxes levied on electricity bills.

The Industrial Strategy will also set out a more immediate boost to government financial support for the most energy-intensive manufacturing sectors, the three people said.

Less than 400 businesses in sectors including steel, ceramics and chemicals currently receive a 60 percent rebate on energy bills under the so-called British Industry Supercharger.

According to one of the people briefed on the government’s plans, the number of businesses that could be eligible may double or triple. At the same time, the support available could increase to 80 to 90 percent.

“Government want to help people who run factories because they can see that energy costs are a real competitive disadvantage,” said one industry figure briefed on the plans, granted anonymity to share them. “Manufacturers are competing to win orders from businesses in France and Germany, where industrial energy prices are very low.”

In addition to expanding the type of sectors that can benefit, plans are in the pipeline for around 40 industrial hubs around the U.K., where businesses will be encouraged to “agglomerate,” said the second person briefed on the plans, who was also granted anonymity.

Businesses based at these hubs may benefit from further support to lower energy bills through backing from the government’s new public power company, GB Energy, the person said.

That could come via the construction of on-site electricity generation or the procurement of lower-priced power supplies sold by GB Energy. A government official said this aspect of the plan has not yet been finalized.

The Department for Business and Trade declined to comment.