Britain’s strategic heavy industries have warned they risk being left high and dry by a lack of support in the government’s upcoming energy strategy, warning that failure to follow European countries’ measures to reduce gas and electricity costs will put UK businesses at risk.
The government is expected to outline long-awaited proposals this week for a once-in-a-generation drive to invest in nuclear power and possibly more onshore wind and solar power, as well as approving continued North Sea oil and gas exploration.
The plan expected to be set out by ministers on Thursday has been delayed amid disagreements in the cabinet about which technologies to back, including a fraught battle over new nuclear power plants, with the Treasury thought to be reluctant to invest large sums in costly projects.
One industry source said heavy energy users were “not expecting anything” to help them on gas or electricity, the latter of which can cost up to 60% more than the price paid by European competitors.
Earlier this month, Boris Johnson promised measures to “address the needs of British steel, British ceramics and the whole of British industry” but the business and energy secretary, Kwasi Kwarteng, told MPs last week that the government had already taken steps to support industrial firms facing soaring costs.
Against a backdrop of ballooning energy bills for strategically important companies and major manufacturing firms, energy intensive industries told the Guardian that the mixed messages had left them fearing they will receive minimal help, or none at all.
Richard Warren, a spokesperson for the trade body UK Steel, said it had “long urged the government to reduce the politically and regulatory controlled elements of electricity bills in line with action taken by governments elsewhere”.
Simply renewing a compensation scheme that gives electricity intensive industries a refund on the cost of the UK’s emissions trading scheme, but which expired on Friday, would be only a “partial solution”.
UK Steel said the industry “needs full compensation for the costs of carbon in electricity, an increase in the relief on renewables levies, and similar reductions in network costs as already provided by governments in France, Germany, and the Netherlands”.
Stephen Elliott, the chief executive of the Chemical Industries Association, warned that prolonged high energy costs could see factories reduce operations or foreign-owned firms take their business elsewhere.
“I can’t stand in front of Kwasi Kwarteng and say that businesses will be shutting a week on Thursday, but I can’t say they’ll be viable and running full tilt, either,” he said. “Things are getting tighter as our ability to pass through cost to our customers is becoming increasingly more difficult.
“Our continental European competitors are getting more relief [following the EU’s recent crisis framework enabling more state aid in this area]. If we leave it to the moment when a chemical plant shuts, restarting those is a very challenging thing to do from a health and safety perspective responsibly.”
Over the weekend, the transport secretary, Grant Shapps, rejected calls for the UK to consider rationing energy, as ministers explore ways to boost Britain’s resilience to international shocks to oil gas markets after the Russian invasion of Ukraine led to record increases in costs.
Kwarteng told the Sunday Telegraph that nuclear energy and offshore wind turbines would play a bigger role in energy production, with as many as seven new nuclear plants by 2050.
Chemicals companies use disproportionately large amounts of electricity in their processes. Inovyn, a chlorine manufacturer that operates from a plant in Runcorn on the banks of the Mersey, uses as much electricity as the nearby city of Liverpool.
Elliott warned that some businesses owned by overseas companies might reconsider their investment in the UK if nothing is done about energy prices.
“If you were to ask investors in chemicals around the world, there are good reasons for coming to the UK, but the negative factor has always been energy costs. So UK sites of foreign parents are always marked down on that front and will increasingly be so. Please don’t leave it until we are shutting, because by then it’s probably too late.”
Elliott wrote to the chancellor, Rishi Sunak, in March calling for greater support for UK companies to pay carbon emissions costs, pointing to measures taken by European countries.
A BEIS spokesperson said: “We will continue to support energy intensive industries with the costs of energy, and will set out details of further support soon.
“Volatile gas prices are a global issue, underscoring the importance of building a strong, homegrown renewable energy sector to further reduce our reliance on fossil fuels.”
•This article was amended on 4 April 2022 to add a comment from BEIS
