UK unveils industrial strategy to cut business power rates by 25%

The UK government is to reduce power bills for energy-intensive firms by a quarter with a new scheme that will address high electricity costs, it said June 23, unveiling its new Industrial Strategy for the decade to 2035.

Over 7,000 British manufacturing businesses in sectors including automotive, aerospace and chemicals will see their electricity rates reduced by up to GBP40/MWh from 2027 through the new British Industrial Competitiveness Scheme, it 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," Prime Minister Keir Starmer said in the statement. "In an era of global economic instability, it delivers the long term certainty and direction British businesses need to invest, innovate and create good jobs."

The initiative exempts eligible firms from paying levies such as the Renewables Obligation, Feed-in Tariffs and the Capacity Market, addressing a key competitive disadvantage that has held back the UK's manufacturing growth.

The strategy represents a fundamental change in the government's approach to industrial policy, developed in partnership with businesses to tackle two critical barriers: high electricity prices and lengthy grid connection delays.

British manufacturers currently face electricity costs significantly above those in other developed economies, while businesses seeking to expand have encountered substantial delays in securing grid connections.

Platts, part of S&P Global Commodity Insights, assessed UK year-ahead baseload power at GBP84.06/MWh (Eur98.27/MWh) June 20, with only Italian 2026 wholesale power higher.

Wholesale costs are just a fraction of industrial power bills, with a number of levies and exemptions applied across European markets.

"These measures will be funded by bearing down on levies and other costs in the energy system. The government also intends to use additional funds from the strengthening of UK carbon pricing, including as a result of linking with the EU carbon market," the government said.

Industry Supercharger plan

The UK government will also increase support for the most energy-intensive firms in sectors like steel, chemicals and glass by raising their discount on electricity network charges from 60% to 90% starting in 2026, through the British Industry Supercharger program.

This will benefit around 500 eligible businesses at no additional cost to taxpayers, according to government estimates.

To address grid connection bottlenecks, the strategy includes a new Connections Accelerator Service launching at the end of 2025, designed to streamline access for major investment projects while prioritizing those creating high-quality jobs.

New powers in the Planning and Infrastructure Bill could allow the government to reserve grid capacity for strategically important projects.

The Industrial Strategy focuses on eight growth sectors where the UK maintains competitive advantages: advanced manufacturing, clean energy industries, creative industries, defence, digital and technology, financial services, life sciences, and professional and business services.

Each sector receives a bespoke 10-year plan targeting investment and job creation.

The UK's high electricity prices and other factors have reduced power demand from the manufacturing sector over the past decade, while many EU countries face similar challenges in a global context.

EU carbon allowances prices, which feed into electricity wholesale prices, were last assessed June 19 at Eur73.01/mt while UKAs were pegged at Eur59.50/mt, according to Platts data, with UK power generators facing an additional GBP18/mt via the UK's carbon price support.