Energy costs to be cut for industry as Starmer seeks economic ‘turning point’

Electricity costs for thousands of businesses across the UK will be cut by scrapping green levies to help them compete with foreign rivals.

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.

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.

Areas of strength

In Wales the new strategy will focus on existing areas of strength, including the aerospace sector in north Wales and the world’s first compound semiconductor cluster in the south.

The key measures announced in Wales are:

UK Government to establish a centre for doctoral training in semiconductors, led by Swansea University, building on the cluster based in south Wales.

A Defence Growth Deal cluster to reflect the presence of the top five Ministry of Defence suppliers in Wales.

£30m for a Local Innovation Partnerships Fund in Wales to work with the Welsh Government and Innovate UK to grow innovation.

The National Wealth Fund working with the Development Bank of Wales to identify and secure financing for investment projects in Wales.

Secretary of State for Wales Jo Stevens said: “Wales has huge potential and our government’s Industrial Strategy will harness the strengths of our businesses and workforce to drive growth and create jobs.

““The strategy will support key sectors like aerospace and compound semiconductors while developing industries of the future like floating offshore wind where Wales is well-placed to be a world leader.

“Our modern Industrial Strategy is built to last and make Wales one of the best places to invest and do business. Working alongside Welsh Government we will boost growth, raise wages and create wealth across our country.”

‘Turning point’

The Prime Minister 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.

The strategy comes after the latest figures indicated the UK 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.

Bedrock

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.”