The UK government’s newly released Industrial Strategy has been welcomed by industry players, but concerns remain over some aspects, including the implementation timeline, Kallanish learns.
Industry association UK Steel says it welcomes the adoption of three recommendations to help tackle industrial electricity prices.
These include the increase of network charging compensation to 90% from 2026, matching what is provided in Germany and France, a move that will save the steel industry £14.5 million/year ($18.5m). This is in addition to the continuation of the indirect compensation scheme, which compensates the steel industry for carbon taxes paid via electricity bills.
Additionally, from 2027, the British industrial competitiveness scheme will provide an exemption for renewables obligation, feed-in tariffs and the capacity market for less electro-intensive businesses. UK Steel estimates this will reduce power prices for eligible manufacturers by £43/MWh, which the government states would represent up to 25% of manufacturers’ electricity bills.
Despite this, a differential remains to European electricity costs, equating to £36m annually on steel bills due to wholesale electricity costs, driven by the UK’s reliance on natural gas power generation.
UK Steel has proposed the introduction of a two-way Contract-for-Difference to peg wholesale prices to those in France and Germany, eradicating the price disparity.
Gareth Stace, director general at UK Steel, says: “The Government has rightly taken action to reduce industrial electricity prices and modelled its new policies on UK Steel’s solutions. UK power prices have for too long damaged the profitability and growth of the steel industry hand over fist, driving away investment and opportunities decarbonise our production.”
“The Industrial Strategy is a step in the right direction towards competitive electricity prices and a better, more effective business landscape, but we are climbing slowly up the foothills of the mountain we need to climb. This is an important milestone, but we are not out of the trenches yet. The Industrial Strategy must be the first of many changes if we are to fully unlock the potential of the UK steel industry to back the growth and stability of our economy,” he adds.
Meanwhile, workers union Unite has also welcomed the move but says it needs to go further to provide the manufacturing sector with the support it needs, and it also needs to be implemented sooner.
Unite general secretary Sharon Graham notes: “UK industry is highly competitive, until you include energy costs which in many industries make it the least competitive. Tackling industrial energy prices is the single most important thing the government can do as part of the industrial strategy.”
“Our energy system is broken beyond repair; it will never function in the interests of business and consumers until it is brought back into public ownership. That must start with the National Grid to ensure industry can get the power it needs when it needs it and is not left waiting forever for new connections,” she adds.
The union also expresses concern over the 2027 implementation, highlighting a “long-term failure to support UK industry”. It proposes that an earlier implementation date would be highly advantageous, along with a clear funding plan.
Carrie Bone UK
