Labour told to tackle sky-high electricity costs 'head-on' as businesses miss out on support

A key relief scheme has been branded as a 'sticking plaster solution'

The Government must tackle sky-high electricity prices “head-on” if British industry is to remain competitive, the energy trade association has warned.

A key relief scheme for businesses was described as “a sticking plaster solution” by Energy UK, which warned thousands of manufacturers remained ineligible for the aid.

It called for a “renewed focus on building an electrified economy”, with reforms that encouraged investment, strengthened supply chains and improved the UK’s international competitiveness.

Bills could be lowered by moving policy costs into general taxation or spreading them through finance, it said.

The Government published its Modern Industrial Strategy last year.

Energy UK said that, while it successfully identified the structural challenges facing businesses, “some of its proposals go only a limited way towards addressing the barriers to long-term economic growth”.

It pointed to the British Industrial Competitiveness Scheme, which sees eligible businesses exempt from certain green levies on their bills.

BICS was recently expanded to 10,000 businesses across eight key industries.

The Energy UK report states: “While the energy bill support offered through the British Industrial Competitiveness Scheme (BICS) was a good start, it is a sticking plaster solution that doesn’t go far enough.

“On its own, it doesn’t sufficiently help the 10,000 companies eligible for the scheme, let alone the majority of the economy that won’t be covered.”

The most energy intensive sectors are supported by a separate scheme, the British Industry Supercharger.

The ceramics and chemical sectors have also each received support packages from Government.

But Energy UK said this left 2.7 million businesses excluded from energy cost support.

It said: “These targeted packages to support UK businesses are hugely limited in scope, excluding large parts of the economy. “They are also typically funded through levies on other businesses, leading to a short-term and reactive redistribution of costs that amounts to a sticking plaster, but not a long-term fix to the competitiveness challenge UK industry faces.”

It called for the Government to “tackle high non-domestic electricity costs, improving the commercial viability of electrification and supporting UK industrial competitiveness to help all businesses decarbonise”.

Energy UK has previously recommended that all business users are given exemptions to certain costs.

The Renewables Obligation, that pays older green generators a premium for electricity, and Feed-in Tariffs, that guarantee payments to small-scale renewable energy producers, should both be moved from all business bills, it has said.

This could be funded by general taxation or the creation of a publicly financed funding scheme.

A reform of business tax should also be carried out to remove the Climate Change Levy from company bills.

This is an environmental tax on non‑domestic electricity and gas that was designed to push businesses to cut energy use and reduce emissions.

Adam Berman, Director of Policy and Advocacy at Energy UK, said: “One year on from the publication of the Modern Industrial Strategy, it's important to take stock. The Government has rightly recognised the structural challenges that British businesses face, and that a successful industrial strategy is critical to the UK's prosperity.

“Systemic economic problems with growth, productivity, and competitiveness require a systemic solution. The Industrial Strategy has provided some piecemeal solutions, but it must evolve and go much further.

“That means narrowing focus and tackling the cost of electricity head-on. It means a recognition that as other countries accelerate toward an electrified economy, capturing the value chain of electrified technologies will put the UK at the forefront of the industries of the future.

“A strategic evolution of our industrial strategy holds the key to creating a more competitive and resilient economy.” The report further recommends reform to grid connections and changing planning rules to speed up approval times.

A Government spokesperson said: “We are glad to see the support for our Industrial Strategy and as we have previously committed, we continue to stay in close contact with businesses and trade unions about the challenges they face to ensure we’re doing what we can to give them the support they need.

“This is why we launched our new British Industrial Competitiveness Scheme to help reduce electricity bills by up to 25 per cent for over 10,000 manufacturing businesses, our Supercharger scheme to cut electricity costs for hundreds of our most electricity-intensive businesses and announced £470 million of support for the chemicals and ceramics industries.”