Jun 25, 2025
The UK has launched an industrial strategy aimed at reducing business electricity costs by 25%.
The UK government announced on June 23 that it will reduce energy costs for energy-intensive firms by 25% through a new program aimed at addressing high electricity prices as part of its Industrial Strategy for 2023 to 2035. Over 7,000 British manufacturers, including those in automotive, aerospace, and chemicals, will benefit from electricity rate reductions of up to GBP40/MWh starting in 2027 through the British Industrial Competitiveness Scheme.
Prime Minister Keir Starmer described this strategy as a significant shift for the UK economy, steering away from previous short-term measures and providing the long-term stability needed for businesses to invest and create jobs. The initiative will exempt qualifying companies from certain levies, addressing a competitive disadvantage that has hindered UK manufacturing growth.
The strategy marks a notable change in the government's industrial policy, created in collaboration with businesses to address two main challenges: high electricity costs and delays in grid connections. Currently, British manufacturers face electricity prices that are considerably higher than those in other developed nations, and delays in grid connections have impacted expansion plans.
According to Platts, UK yearly baseload power was priced at GBP84.06/MWh as of June 20, with only Italian 2026 wholesale power being more expensive. Wholesale costs account for only a small part of industrial electricity bills, which are subject to various levies across European markets.
The government indicated that these measures will be financed by reducing levies and other energy system costs, and it plans to use additional funds from enhanced UK carbon pricing linked to the EU carbon market.
Additionally, the UK government will boost support for its most energy-intensive sectors, such as steel and chemicals, by increasing their electricity network charge discounts from 60% to 90% starting in 2026 through the British Industry Supercharger program. This initiative is expected to help around 500 businesses without increasing taxpayer expenses.
To alleviate grid connection delays, a new Connections Accelerator Service will launch at the end of 2025, aimed at improving access for major investments while focusing on those that create quality jobs. New provisions in the Planning and Infrastructure Bill may allow the government to reserve grid capacity for key projects.
The Industrial Strategy will target eight growth sectors where the UK has competitive advantages: advanced manufacturing, clean energy, creative industries, defense, digital and technology, financial services, life sciences, and professional and business services, each with a tailored 10-year plan for investment and job creation.
High electricity prices and other factors have led to decreased power demand from the manufacturing sector in the UK over the last decade, similar to challenges faced by many EU countries globally. As of June 19, EU carbon allowances were priced at Eur73.01/mt, while UK allowances were at Eur59.50/mt, with UK generators facing an additional GBP18/mt due to the UK's carbon price support.
Prime Minister Keir Starmer described this strategy as a significant shift for the UK economy, steering away from previous short-term measures and providing the long-term stability needed for businesses to invest and create jobs. The initiative will exempt qualifying companies from certain levies, addressing a competitive disadvantage that has hindered UK manufacturing growth.
The strategy marks a notable change in the government's industrial policy, created in collaboration with businesses to address two main challenges: high electricity costs and delays in grid connections. Currently, British manufacturers face electricity prices that are considerably higher than those in other developed nations, and delays in grid connections have impacted expansion plans.
According to Platts, UK yearly baseload power was priced at GBP84.06/MWh as of June 20, with only Italian 2026 wholesale power being more expensive. Wholesale costs account for only a small part of industrial electricity bills, which are subject to various levies across European markets.
The government indicated that these measures will be financed by reducing levies and other energy system costs, and it plans to use additional funds from enhanced UK carbon pricing linked to the EU carbon market.
Additionally, the UK government will boost support for its most energy-intensive sectors, such as steel and chemicals, by increasing their electricity network charge discounts from 60% to 90% starting in 2026 through the British Industry Supercharger program. This initiative is expected to help around 500 businesses without increasing taxpayer expenses.
To alleviate grid connection delays, a new Connections Accelerator Service will launch at the end of 2025, aimed at improving access for major investments while focusing on those that create quality jobs. New provisions in the Planning and Infrastructure Bill may allow the government to reserve grid capacity for key projects.
The Industrial Strategy will target eight growth sectors where the UK has competitive advantages: advanced manufacturing, clean energy, creative industries, defense, digital and technology, financial services, life sciences, and professional and business services, each with a tailored 10-year plan for investment and job creation.
High electricity prices and other factors have led to decreased power demand from the manufacturing sector in the UK over the last decade, similar to challenges faced by many EU countries globally. As of June 19, EU carbon allowances were priced at Eur73.01/mt, while UK allowances were at Eur59.50/mt, with UK generators facing an additional GBP18/mt due to the UK's carbon price support.