The UK government is set to significantly reduce energy prices for British manufacturers, aiming to enhance their competitiveness. Key industries like steel, ceramics, and chemicals will see their electricity standing charges drop by up to 90%.
Currently, British industrial electricity prices are the highest in the G7, contributing an additional £29 billion in costs over the last four years. This move is part of a broader strategy to help UK manufacturers better compete with European counterparts.
Ministers are expected to announce a multibillion-pound support package for energy-intensive industries on Monday. Reports indicate that discussions between the Department for Business and Trade and the Treasury have focused on making energy prices more competitive.
The Times has reported that the standing charges for electricity in sectors such as steel and ceramics will fall significantly, resulting in savings of hundreds of millions of pounds annually. Chancellor Rachel Reeves is also looking to extend this support to other currently ineligible industries, with plans for a consultation that may include advanced manufacturing.
Earlier this week, it was disclosed that the UK’s industrial sector has been burdened with an extra £29 billion in rising energy costs over the past four years. UK electricity prices are 46% higher than the average reported by the International Energy Agency (IEA), which tracks a significant portion of global demand.
According to the Energy and Climate Intelligence Unit (ECIU), gas costs for UK firms have doubled in recent years, while electricity prices have risen by 60%, making them four times higher than in the US and significantly more than in Canada and France.
The steel industry has been particularly hard hit, with average energy bills for plants increasing by 80% since 2021, the year before Russia’s invasion of Ukraine. IEA data shows that British companies are currently paying £258 per megawatt-hour for electricity, compared to £178 in France and £177 in Germany.
Business Secretary Jonathan Reynolds has not confirmed whether next week’s industrial strategy will outline a plan to reduce energy prices but noted it is a significant focus for the government.
Rain Newton-Smith, head of the Confederation of British Industry (CBI), indicated that costs associated with net zero policies, such as expanding the national grid and accelerating renewable energy deployment, have contributed to rising electricity prices.
Ministers are hopeful that approving the £14.2 billion Sizewell C nuclear plant in Suffolk, as mentioned in the Spending Review, will help lower costs in the future.
