The UK government has unveiled a major overhaul of industrial energy policy, pledging to slash green levies on more than 7,000 businesses in an effort to cut electricity costs and revitalise the country’s struggling manufacturing sector.
The initiative, announced Monday by Prime Minister Keir Starmer, forms a central part of a new 10-year industrial strategy aimed at restoring economic confidence, driving innovation, and creating jobs. It marks the most significant shift in the UK’s industrial policy in years.
Under the changes, manufacturers will be exempt from certain green levies, including the Renewables Obligation, which was originally designed to support early renewable energy projects. The government says this move will alleviate financial pressure on industries that have long complained of disproportionately high electricity prices compared to European counterparts.
“This strategy is a turning point for Britain’s economy,” said Starmer. “We are moving away from the short-termism of the past and delivering long-term certainty that British businesses need to invest, innovate, and create good jobs.”
A second measure will provide deeper energy cost relief for around 500 electricity-intensive firms, including those in the steel, glass, aluminium, and ceramics sectors. These businesses will now receive a 90% discount on grid connection charges—up from the current 60%.
Although welcomed by industry, the reforms have drawn cautious optimism. Steel producers, for example, estimate that annual savings will amount to around £15 million—helpful, but not transformative given ongoing challenges.
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The strategy also includes commitments to accelerate grid connections for major projects and streamline planning for industrial and tech developments. A fast-track process is expected to launch later this year, addressing delays that have hindered large-scale investment.
Chancellor Rachel Reeves described the plan as “ambitious and essential,” aligning with her recent spending review focused on infrastructure, technology, and skills. “It’s about making sure the industries that make Britain great can thrive once more,” she said.
Importantly, the government insists the levy cuts will not increase household energy bills or draw on taxpayer funds. Instead, they will be financed through reforms to the broader energy system, details of which are still to be finalised.
Another key element is the potential linking of the UK’s Emissions Trading Scheme with the EU’s carbon market—seen as a move to align carbon pricing and boost cross-border investment. Talks are ongoing following a UK-EU summit in May.
The strategy targets eight growth sectors: advanced manufacturing, clean energy, digital, life sciences, financial and professional services, creative industries, and defence.
Business leaders have broadly welcomed the measures. Rain Newton-Smith, head of the Confederation of British Industry, called it a “bedrock for growth,” while Stephen Phipson of Make UK praised it as a “giant and much-needed step forward” that addresses key issues like energy costs, skills, and access to capital.
With an eye on restoring confidence in post-Brexit Britain and boosting traditional Labour heartlands, the government hopes the long-term plan will signal that the UK is once again serious about industrial growth.
