Industry welcomes UK Industrial Strategy with cautious optimism

Identifies chemicals, steel and critical minerals as ‘foundational industries’

INDUSTRY leaders have cautiously welcomed the UK government’s new Industrial Strategy, which outlines a long-term vision to boost manufacturing, reduce energy costs, and close critical skills gaps.

The strategy sets out a decade-long plan focused on eight key sectors – from clean energy and advanced manufacturing to digital technology and life sciences – with an emphasis on cutting industrial electricity prices and strengthening the engineering workforce.

The government has also identified chemicals, steel, critical minerals, composites and materials as “foundational industries” that are “vital” to each of the eight priority sectors, along with ports, construction and electricity networks.

A central element of the strategy is the government’s plan to cut industrial electricity costs – among the highest in the developed world – by £35–£40 (US$47–US$53) per MWh from 2027, representing a reduction of around 25%. It aims to achieve the savings by widening exemptions to emissions levies for energy-intensive businesses such as chemicals and steel manufacturing. The government estimates that 7,000 businesses, employing a total of 300,000 people, could be eligible.

The energy cost reduction plan, known as the “British Industrial Competitiveness Scheme”, will run until 2030, at which point it will be reviewed.

In addition, the government has increased the compensation that energy-intensive businesses can claim for electricity grid charges from 60% to 90%, bringing the UK in line with equivalent schemes in France and Germany. Due to be implemented from 2026, trade association UK Steel calculates it will cut electricity costs by £6.50 per MWh.

Eligibility criteria for grid charge compensation and exemptions to emissions levies are yet to be finalised and will be determined through a consultation which is now open.

Industry leaders have long warned about the impact of high electricity costs. UK Steel calculated that electricity costs in 2024/25 for British steel producers were on average £66 per MWh, compared to £43 in France and £50 in Germany.

Gareth Stace, director general of UK Steel, said: “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.”

The Chemical Industries Association (CIA) said: “The reappearence of an industrial strategy after a six-year absence is a welcome and long-overdue step.” And it was “pleased to see that chemicals have been recognised in the Industrial Strategy”.

Chemicals major Ineos welcomed the proposals to cut electricity costs but warned more must be done about the high price of gas used by the sector for fuel and feedstock.

Tom Crotty, director of corporate affairs at Ineos, said: “Far-reaching, immediate reforms on industrial gas pricing and carbon tax reduction are essential. Without them, investment, jobs, and UK capability will continue to drift overseas.”

Refining trade group Fuels Industry UK said it was disappointed that fuels hadn’t been named a foundational industry and warned the strategy does not do enough to address the challenges facing refiners – with Grangemouth closing in April and Lindsey refinery going insolvent just a week after the strategy was launched (see p14).

The government has also said it will cut the administrative costs of regulation by 25% while reducing the number of regulators.

While the strategy on industrial electricity costs has largely been welcomed by industry groups, some remain sceptical. Caroline Bragg, CEO of heat network lobby group Association for Decentralised Energy, described the details on funding as “vague” and criticised the strategy for prioritising a “small number of select businesses”.
Bragg added: “Ministers need to wake up. We cannot build a secure, affordable, low-carbon energy system while actively discouraging all the businesses that use it from investing in their future.”