Ministers have moved to level the playing field on energy costs between British manufacturers and their European competitors after years of concerns that domestic firms faced an unfair disadvantage.
The “British Industry Supercharger” scheme aims to improve conditions for 300 companies – employing 400,000 workers – in sectors including steel, metals, chemicals and paper manufacturing.
Ministers have proposed to exempt firms from certain costs arising from renewable energy obligations as well as costs related to ensuring Britain has secure and reliable power supplies.
Officials will also consider reducing network charges, which are the costs industrial users pay for their supply of electricity. The proposals will be assessed in the spring.
The proposals were welcomed by industrial groups, which have long campaigned for help to bring electricity costs in line with European competitors.
High energy prices have been blamed for difficulties in the steel industry, which is trying to find funds to invest heavily in lower-carbon technologies. The pressures have led to job losses and British Steel said on Wednesday it is closing the coking ovens at its Scunthorpe works with the loss of 260 jobs.
In 2021, steelmakers warned that rivals on the continent were “constantly laughing” at UK manufacturers and flooding the market with cheaper steel made at lower costs.
Gareth Stace, director general of UK Steel, said: “UK industrial electricity prices have been uncompetitive for many years, and today, the government took a great step towards levelling the playing field for the steel industry.
“We welcome this announcement and look forward to working with government to ensure full price parity with European competitors. It is essential we can compete on an equal footing, in the short term, within the fiercely competitive steel market, both in Europe and globally.”
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Dave Dalton, the chair of the Energy Intensive Users Group, said: “These measures will bring our industrial electricity prices more in line with those in other countries and help the competitiveness and decarbonisation of energy intensive industries in the UK”.
Energy security secretary Grant Shapps said: “Today’s measures will help deliver the affordable, reliable energy that these industries need to become greener, and secure jobs for the future.”
The measure comes on top of the support offered to cut the energy bills of businesses. The government plans to provide £5.5bn of “transitional support” for businesses over 12 months from 1 April 2023 but has faced criticism from firms who claim the support is not generous enough.