Government Targets High Energy Costs in New Industrial Strategy
The UK government is set to unveil a sweeping 10-year industrial strategy aimed at boosting business growth, with a primary focus on reducing energy costs for over 7,000 manufacturing firms. Under the British Industrial Competitiveness Scheme, manufacturers will be exempted from green levies, potentially cutting electricity bills by up to 25%.
These levies—such as the renewables obligation, feed-in tariffs, and the capacity market—have contributed to UK manufacturers facing some of the highest energy costs in the developed world. From 2027, this scheme is expected to cut up to £40 per megawatt-hour from bills. In addition, the most energy-intensive sectors—including steel, glassmaking, and chemicals—will benefit from increased discounts under the British Industry Supercharger initiative, rising from 60% to 90% in 2026.
Prime Minister Sir Keir Starmer hailed the strategy as a “turning point for Britain’s economy,” citing it as a long-term move to encourage business investment, innovation, and job creation. However, critics like Acting Shadow Energy Secretary Andrew Bowie argue the plan acknowledges the unaffordable costs of net zero targets, calling the subsidies a “bailout” to keep businesses afloat.
Broader Strategy Aims to Drive Job Growth and Innovation
Beyond addressing energy costs, the government’s industrial strategy outlines measures to create over one million well-paid jobs within the next decade. These efforts include an annual investment of £1.2 billion in skills development by 2028–29 to reduce dependence on foreign workers, along with visa and migration reforms to attract elite global talent. Additional reforms will aim to streamline planning processes by hiring more planners, reducing approval times, and cutting costs for developers.
The strategy also includes a significant boost in research and development (R&D) spending, targeting £22.6 billion per year by 2029–30. Of this, £2 billion will be dedicated specifically to artificial intelligence, placing innovation at the center of the UK’s long-term growth agenda. Plans are underway to accelerate grid connections for new factories, reducing delays for large-scale industrial projects.
Chancellor Rachel Reeves emphasized the comprehensive scope of the plan, stating it will channel billions into investment, cutting-edge technology, energy relief, and workforce upskilling.
Sector-Specific Plans and Mixed Reactions from Stakeholders
The government is initially prioritizing eight key sectors: advanced manufacturing, clean energy, creative industries, defence, digital and tech, financial services, life sciences, and professional services. Five of these will receive dedicated 10-year growth plans immediately, while strategies for defence, financial services, and life sciences will be released at a later date.
Industry leaders have responded positively to the energy relief measures. Make UK’s chief executive, Stephen Phipson, praised the government for targeting the “three major challenges” faced by industry—skills shortages, unaffordable energy, and lack of capital access. The TUC’s Paul Nowak also welcomed efforts to curb energy costs, calling it a long overdue move to level the playing field with European competitors.
However, opposition voices stress the need for inclusive implementation. Liberal Democrat business spokesperson Sarah Olney urged the government to prioritize small businesses in its planning and ensure the strategy delivers practical solutions, not just broad promises.
The announcement follows a concerning 0.3% contraction in the UK economy in April—the sharpest in 18 months—heightening expectations for bold and effective policy interventions.
