Britain’s factories are set to benefit from hundreds of millions of pounds in savings after the government announced sweeping cuts to industrial energy costs in a bid to stem a wave of closures across the manufacturing sector.
Peter Kyle, the Business Secretary, confirmed that from next year energy-intensive industries such as steel, glass and ceramics will receive a 90 per cent discount on electricity network charges — up from the current 60 per cent. The move is expected to save around 500 firms as much as £420 million a year.
The announcement follows mounting pressure on ministers to tackle Britain’s sky-high industrial electricity prices, which remain among the highest in the developed world and have been blamed for a series of recent factory shutdowns.
Despite the scale of the relief, business groups voiced frustration that the measures will not be applied retrospectively to April 2024. It is understood that Mr Kyle had pushed for the scheme to be backdated but was overruled by energy secretary Ed Miliband after weeks of internal wrangling.
The Department for Business and Trade (DBT) has also faced criticism for delays to the British Industrial Competitiveness Scheme (BICS) — a long-awaited programme designed to cut energy costs by up to a quarter for more than 7,000 firms from 2027 by removing certain net zero levies from bills. A consultation on the plan has yet to begin, leaving manufacturers uncertain about the timeline for further relief.
Mr Kyle said the new discounts would be funded through departmental efficiency savings rather than additional customer charges or new industry levies. He described the reforms as a vital step towards levelling the playing field for British exporters competing with European rivals.
“These measures will help businesses grow and invest with confidence,” he said, promising additional support for energy users “in the not too distant future”. He declined to confirm whether further help will be included in Chancellor Rachel Reeves’s Budget on 26 November, but signalled that the government’s pro-growth agenda would include more energy and regulatory reforms.
The Business Secretary also pledged to “get the balance right” in the forthcoming employment rights bill after the House of Lords approved amendments expanding union powers and introducing “day one” workplace rights.
Kyle said his department would launch 27 new consultations, stressing that “consultation means I will listen. It means I will act — in a way that is pro-growth and fit for the modern age we live in.”
He hinted at a broader deregulation and planning reform push, saying: “We’re going to carry on with the same kind of zeal and urgency into the future.”
Louise Hellem, lead economist at the Confederation of British Industry (CBI), welcomed the announcement, describing it as “an important step in bringing UK industrial energy costs closer in line with European competitors”.
However, she warned that more needs to be done to reduce energy cost pressures across the wider economy. “As firms urgently await the BICS consultation, the upcoming autumn Budget presents a vital opportunity to introduce targeted measures that help more businesses cut energy use and electrify their processes,” she said.
The reforms mark a key test for Labour’s industrial strategy as it seeks to balance fiscal discipline, competitiveness and green transition goals — all while reviving confidence in Britain’s manufacturing heartlands.
Amy Ingham
Amy is a newly qualified journalist specialising in business journalism at Business Matters with responsibility for news content for what is now the UK’s largest print and online source of current business news.