Prime Minister Sir Keir Starmer faces mounting pressure from the business community as his highly anticipated industrial strategy is set to be unveiled later this month. Key industry players in the UK have raised significant concerns, stating that the initiative could be rendered “fatally flawed” if it fails to address the country’s soaring energy costs, which are currently reported to be 46% higher than the global average.
Government officials have acknowledged the critical need for a comprehensive approach to high energy prices in the industrial strategy. Despite this recognition, there are fears among business representatives that the government may limit its support to only the most energy-intensive sectors, such as steel manufacturing and ceramics. This perceived narrow focus could leave a multitude of other industries grappling with skyrocketing power bills without adequate assistance.
Amid these discussions, the “British Industry Supercharger” scheme has drawn attention as a potential tool to alleviate some of the energy burden. Launched by the previous Conservative government under Prime Minister Rishi Sunak in April 2024, the program initially aimed to provide relief for 370 energy-intensive companies. According to insiders familiar with governmental planning, there are considerations underway to enhance the generosity of this scheme, particularly in light of the broader industrial strategy.
Rain Newton-Smith, the director-general of the Confederation of British Industry (CBI), expressed that failing to address the high energy costs for all industries would be a significant oversight. “Unless the industrial strategy delivers a solution to the UK’s high energy costs for industry, it will have failed,” she stated. Her remarks underscore the urgent necessity for a more inclusive approach to energy pricing, as sectors including chemicals, aerospace, and automotive manufacturing are feeling the brunt of elevated electricity costs.
The stark reality is that industrial energy expenses in the UK are reported to be four times those in the United States, exacerbated by a broader 46% premium over the global average. Industry stakeholders, including the manufacturing lobby group Make UK, have articulated concerns that unless urgent action is taken to confront these high costs, the very security and sustainability of the UK economy could be jeopardized.
Starmer’s industrial strategy aims to prioritize eight specific sectors deemed critical for growth: advanced manufacturing, clean energy, creative industries, defense, digital technologies, financial services, life sciences, and professional business services. Officials close to Business Secretary Jonathan Reynolds have indicated that energy concerns are a recurring theme in discussions surrounding the strategy.
The government appears to be considering more substantial reductions in network charges, potentially elevating support for eligible companies from the current 60% up to nearly 90%, which aligns with the compensation levels offered by France and Germany. Furthermore, business groups are advocating for a more equitable distribution of energy bill reductions—proposing the elimination of certain levies such as the “renewables obligation” and the “climate change levy.”
Stephen Phipson, the CEO of Make UK, articulated the gravity of the situation: “If we don’t address the issue of high industrial energy costs as a priority, we risk the security of our country.” His comments resonate with the overarching sentiment that decisive action is needed to ensure the competitiveness of the UK industrial landscape.
Adding to the urgency, Alan Johnson, senior vice-president of Nissan, highlighted the particularly acute energy cost challenges facing the automotive sector. Johnson noted that the Nissan plant in Sunderland, the largest car manufacturing site in the UK, bears the highest energy expenses of all Nissan facilities worldwide—a troubling indicator of the broader challenges within the industry.
As the release date of the industrial strategy coincides with the upcoming Treasury comprehensive spending review on June 11, the stakes are high. Clarity on how the strategy will tackle energy pricing will be crucial not only for industrial players but for the overall health of the UK economy going forward. The Department for Business and Trade has opted not to comment on speculation regarding the contents of the industrial strategy, but anticipation continues to build as business leaders closely monitor the forthcoming announcements for insights on how they may impact operations and competitiveness in a challenging economic environment.
With the outcomes of this industrial strategy poised to significantly shape the future of British industry, the essential discussion surrounding energy costs remains at the forefront of many stakeholders’ minds, particularly as they bristle under the current financial pressures. The ensuing decisions could very well define the contours of the UK’s manufacturing and industrial capabilities for years to come, laying critical groundwork for both immediate relief and long-term sustainability in an increasingly competitive global market.