About 500 energy-intensive businesses, including Ineos at Grangemouth, will see their bills cut under a new UK government scheme to help them stay competitive.
Discounts on electricity network charges will rise from 60% to 90%, saving £420 million for those operatingin industries such as steel, glass and cement, employing 400,000 workers.
The discount was welcomed by industry and the trade unions, but it does not tackle the wholesale price of energy. The UK’s energy costs were the highest in the G7 group of developed nations.
The Supercharger and British Industrial Competitiveness Scheme will be funded through reforms to the energy system.
Unite’s secretary general Sharon Graham said she welcomed help with costs, but the amount saved would be “quite small” with profits in the energy sector “obscene” and in need of an overhaul.
The new discount is announced a month from the Budget and there are fears that gains made in this scheme will be offset by new tax rises.
Business Secretary Peter Kyle said the funding was aimed at “levelling the playing field” with international competitors, and that the bill reduction would be paid for through existing government tax revenue.
“The savings we have made for it, we have targeted to make businesses like this more competitive, so therefore creating more jobs, more wealth, more revenue for our country,” he said.
The scheme is applicable across England, Wales, and Scotland, and some of the companies which will benefit from the change include Tata Steel at Port Talbot, and INEOS in Grangemouth.
The reduction is on network costs, which are what businesses pay to access the UK’s electricity network, and make up about 20% of a company’s energy bill – meaning a 90% reduction works out at about 18% of the overall energy bill.
UK Steel said the uplift in compensation was “greatly welcomed”, but firms would not see the benefit until payments were made in arrears in 2027.
“It is frustrating that the steel industry must face yet another year of uncompetitive electricity prices,” said UK Steel’s director general Gareth Stace.
Louise Hellem, chief economist, CBI, said: “UK businesses have faced some of the highest industrial electricity prices in the G7, making it harder to stay competitive internationally. Today’s announcement has been long called for by the CBI to support levelling the playing field for British industry.
“Bringing down costs for energy intensive businesses by cutting network charges and bringing costs closer in line with our European competitors fulfils an important commitment in the UK’s modern Industrial Strategy.
“But there’s still further to go, easing energy cost pressures for all businesses is essential to provide the headroom to invest. As firms urgently await the British Industrial Competitiveness Scheme consultation, the upcoming Autumn Budget presents a vital opportunity to introduce targeted measures that help more businesses cut energy and electrify their processes.”
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