UK Government to cut industrial energy costs by £400m a year
UK Government to cut industrial energy costs by £400m a year
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Around 500 of Britain’s most energy-intensive businesses are set to save up to £420 million annually on their electricity bills from April 2026, under new government measures aimed at boosting industrial competitiveness and protecting jobs.
The UK Government has confirmed plans to increase the discount on electricity network charges for heavy industries including steel, cement, glass and chemicals from 60% to 90%. The move is expected to benefit companies employing around 400,000 people across the country.
The initiative, announced by Business and Trade Secretary Peter Kyle on 31 October, is designed to bring UK industrial energy prices in line with those of major European economies.
Many British manufacturers currently face some of the highest electricity costs in the G7, making it harder to compete internationally.
“British industry deserves a level playing field and this government is delivering it. We’ve heard businesses loud and clear, and this landmark support will help them stay competitive on the global stage so they can invest and grow here in the UK,” said Kyle.
“This is our Modern Industrial Strategy in action: practical, targeted support that secures jobs, attracts investment and drives our economy forward, as part of our Plan for Change.”
The increased discount will apply across the UK, with industries in Wales among the key beneficiaries. Firms such as Tata Steel in Port Talbot are expected to see substantial reductions in costs, supporting local employment and economic growth.
Secretary of State for Wales Jo Stevens said: “We are backing our key Welsh industries to drive economic growth, boost investment and create well-paid jobs.
“For too long they have been held back by high energy costs. But by providing cheaper bills to key sectors like manufacturing and steelmaking while developing energy sources of the future like floating offshore wind, the UK Government will make Wales one of the best places to invest and do business for decades to come.”
Business groups and industry leaders have broadly welcomed the announcement, describing it as a long-awaited step to level the playing field for UK manufacturers.
Encirc Glass Managing Director Sean Murphy said: “This will be a major boost for our industry and will help British glass manufacturers compete with cheaper imports from regions that do not bear the same level of cost and regulation.
“By cutting the costs of energy in this way, the government is helping our industry to support thousands of jobs across the country whilst we make the transition to renewable sources of power.
“We welcomed the opportunity to engage with the Minister on the pressing challenges facing our sector. Continued government support for vital industries like glass manufacturing is essential to safeguarding jobs and unlocking investment across all regions of the UK.”
Ben Martin, Policy Manager at the British Chambers of Commerce, added: “Our research shows energy costs remain a major concern, forcing many businesses who are struggling to pay their bills to raise prices.
“Energy is a business essential not a luxury. The promise of cheaper bills for hundreds of energy-intensive firms through increasing the discount on electricity network charges is welcome.”
Community Union Assistant General Secretary Alasdair McDiarmid also praised the move, calling it a “huge step in the right direction.”
He said: “We welcome the government’s determination to reduce the industrial energy costs which are such a huge burden on energy-intensive industries like steel.
“Whilst there is still more to do, the decision to increase the level of compensation for network charging costs from 60% to 90% is a huge step in the right direction.
“This will help avert carbon leakage and will go some way towards boosting the competitiveness of our steel producers in line with European counterparts.
“After long years of neglect, our members in the steel sector know that they now have a government which is on their side.”
The enhanced support package, introduced under the Network Charging Compensation (NCC) Scheme, forms part of the UK’s modern Industrial Strategy launched in June. The scheme is being delivered at no extra cost to taxpayers and follows a consultation held earlier this year.
It complements the government’s British Industrial Competitiveness Scheme, due to launch in 2027, which will cut energy costs by 25% for more than 7,000 businesses in sectors such as aerospace, automotive and chemicals.
Both programmes will be funded through reforms to the energy system, with the government reducing internal system costs to avoid raising taxes or household bills.
Additionally, a new Connections Accelerator Service is expected to be operational by the end of 2025, designed to streamline access to the electricity grid and speed up major investment projects across the UK.
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