UK manufacturing set for a funding boost to reduce energy costs
UK manufacturing is expected to receive support to ease energy costs and boost skills, the Guardian understands, as part of a long-awaited industrial strategy due to be unveiled next week.
Energy-intensive industries have long complained that they pay too much for electricity compared with competitors in the EU, while the wider industrial sector has struggled to recruit skilled staff.
As Nigel Farage's Reform party targets support in Britain's industrial heartlands, ministers are poised to pour funds into boosting the manufacturing workforce with proposals similar to a £600m package for the construction sector announced earlier this year, which underpins plans to build 1.5m homes.
Ministers have drawn up plans to target energy costs through two policies, one targeted at businesses that use the most electricity – such as steel and aluminium – and another designed to support manufacturing more broadly.
These are expected to be at the heart of the strategy, which could be announced as soon as Monday.
First, the government will increase from 60% to 90% the 'network compensation charging' (NCC) scheme, a discount for energy-intensive businesses on the fees they pay to connect to the Grid.
The discount, which is ultimately paid for by other electricity bill-payers including households, is available under the British Industry Supercharger iniative brought in by the previous government.
Industry sources said increasing the discount would reduce costs for struggling steelmakers by about £6.50 per megawatt hour (MWh).
This is expected to help major firms such as Tata and British Steel, which is under government control, manage the costly transition from blast furnaces to greener electric arc furnaces.
However, industry sources said that, while the policy was welcome, the overall saving for the sector is only expected to be worth about £15m a year.
Energy costs are likely to remain significantly higher than in Germany and France, chiefly because UK electricity prices are linked to the cost of wholesale gas, which is a larger part of the British energy mix than on the continent.
Speaking at the Paris airshow earlier this week, the business and energy minister, Sarah Jones, said: 'Whether you're a company wanting to invest in the UK or whether you're an existing company in the UK, energy prices is a challenge. The fact that we're not competitive with it, with Europe, is the challenge.'
For smaller manufacturers, ministers will consult on a new 'intensity threshold' to provide relief. The scheme, which could be up and running as soon as 2027, is expected to work by analysing the ratio between a company's energy usage and its turnover, adjusting the support on offer accordingly.
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Make UK, the trade body for the sector, welcomed indications that firms are in line to receive the support they have long campaigned for.
'If we're going to move the dial in the industrial strategy we have to get manufacturers' eye-watering energy costs more in line with our competitors,,' said Stephen Phipson, chief executive of Make UK.
'This would be an incredibly welcome move for companies and provide a much-needed shot in the arm at a time when they are facing multiple challenges on all fronts.
'It would also give a vital kickstart to investment and help manufacturing support the government to deliver its growth mission to boost the economy.'
The strategy is also likely to include greater powers for the state-owned British Business Bank to invest directly in businesses, particularly small and medium-sized startups.
The department for business and trade declined to comment on the content of the industrial strategy.
Ministers were expected to publish the industrial strategy earlier this year but the announcement was postponed as the government brought forward detailed plans for individual sectors.
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