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Ministers are drawing up plans to help shield British industry from sky-high energy costs in what is expected to be the centrepiece of Sir Keir Starmer’s vaunted new industrial strategy.
Business leaders have been assured by ministers that they are serious about dealing with the problem, which leaves British companies facing much higher energy prices than major competitors.
“If we don’t deal with uncompetitive energy prices, it doesn’t really matter what else we do,” said one government official working on the industrial strategy.
“If we put out an industrial strategy without dealing with the single biggest thing that is making business uncompetitive, we would be rightly laughed at.”
The industrial strategy, to be published in June, is seen in Downing Street as a big part of Starmer’s political fightback, after Labour was hammered in last week’s local elections in industrial regions such as Durham.
Number 10 is focused particularly on connecting the strategy with a promised rearmament drive, while the wide-ranging plan will also address Britain’s chronic skills shortages.
Ministers are prioritising eight sectors: advanced manufacturing, clean energy, creative industries, defence, digital and technologies, financial services, life sciences, and professional and business services.
In recent weeks there has been growing concern in some quarters — including among some people involved in drawing up the strategy — that the package would fail to deliver a sufficient punch.
One person called the exercise a “red herring” while a senior government official said: “I’m not sure there’s enough energy behind it. It needs to be an A*, all guns blazing exercise. I’m not sure we are there yet.”
Stephen Phipson, chief executive of the Make UK manufacturing lobby group, told the Financial Times last week that not all ministers were taking the process seriously and that Britain risked “passive deindustrialisation”.
But last week, Phipson was briefed on the emerging plan and afterwards he took a very different tone. “Progress within government on a bold industrial strategy appears to be gaining momentum again, which is welcome,” he said.
Although details of how to cut industrial energy costs are still being thrashed out, one option being considered — according to those working on the plan — is to further cut network charges paid by industrial users.
A British industry “Supercharger”, announced by Rishi Sunak’s Conservative government to help some energy-intensive companies, last year cut network charges by 60 per cent. One person involved in discussions said that figure could increase.
UK industry has long complained that high energy costs make it uncompetitive, particularly compared with the US and China.
Sir Jim Ratcliffe, the founder of chemicals giant Ineos, warned last month that “excessive” energy costs as well as carbon taxes were “squeezing the life out of the sector”.
Including taxes, the UK’s industrial electricity prices in 2023 were about four times higher than those in the US and 46 per cent higher than Germany’s, according to the International Energy Agency.
Preliminary data from the IEA also shows that energy-intensive industrial users — such as steel factories — faced electricity prices more than 2.5 times higher than those in China in 2024.
Industrial gas prices in the UK are also far higher than in the US, which has a booming domestic gas production industry, but have been slightly lower than France’s and Germany’s over the five years up to 2023, the last year for which data is available.
A government spokesman said: “Our modern industrial strategy will target the most promising sectors for the UK’s future prosperity, including advanced manufacturing and clean energy.”
