Industry in line for energy price cuts

Energy-intensive industries such as steel and paper mills could have their power bills subsidised more by the government in an effort to increase the competitiveness of manufacturers as prices climb.

The cost of industrial electricity in the UK is said to be higher than in other countries, including parts of the EU, which the government said could reduce the competitiveness of British companies and deter investment.

The government is holding a consultation on whether to increase the level of relief that power-intensive businesses receive on a range of green levies that are added to their electricity bills, from 85 per cent up to 100 per cent. More than 300 businesses, employing 60,000 people, receive reduced energy bills under the exemption scheme.

Companies have been asked to put forward their view on what the exemption should be with evidence to support their case. Ministers will then decide the level of the subsidy and how it will be funded.

Kwasi Kwarteng, the business secretary, said: “British manufacturers are the lifeblood of our economy and central to our plans to overcome this period of economic uncertainty.

“With global energy prices at record highs, it is essential we explore what more we can do to deliver a competitive future for those strategic industries so we can cut production costs and protect jobs across the UK.”

The steep increase in energy bills reflects soaring wholesale energy costs driven by fears over gas and power shortages as Russia restricts gas supplies to Europe.

The consultancy Cornwall Insight has said that it does not expect wholesale prices to return to 2020-21 levels before 2030.

In its present form the exemption scheme reduces net electricity prices for energy-intensive industries by between £19/MWh and £37/MWh on average and reduced the total electricity bills for those businesses by about a quarter last year.

The government said that Britain’s higher electricity bills compared with other countries could hamper investment, competition and commercial viability for hundreds of businesses in industries including steel, paper, glass, ceramics and cement and risk them relocating from the UK.

High industrial energy users in the UK pay higher energy bills than the EU 14 group of countries including France, Germany and Spain.

Without government support, higher energy costs could also discourage manufacturers from electrifying their manufacturing processes, the Department for Business, Energy and Industrial Strategy said, which “in turn, might make it more challenging to deliver net-zero outcomes”.

Gareth Stace, the director-general of UK Steel, said: “The publication of this consultation is a significant step forward in delivering competitive electricity prices for the UK steel sector and should provide some much-needed relief in the face of extremely challenging circumstances at the current time. While there remain difficulties, this announcement demonstrates that the UK government understands the challenges of British industry and continues to support steelmakers and steel communities across the country.”

Cornwall Insight warned this month that energy costs for businesses across the board were rising even faster than for households and risked tipping companies “over the edge” unless the government intervened.