Energy-intensive UK companies set to receive state support

The UK government is poised to help more than 300 energy-intensive companies to cope with the debilitating cost of power as ministers seek to stem a wave of job losses in the steel sector.

Kemi Badenoch, the business secretary, will on Thursday announce measures to support employers in sectors including steel, metals, paper and chemicals that are among those most exposed to the high cost of electricity.

The package comes on top of an offer of subsidies to Britain’s two biggest steel companies to prevent them closing their blast furnaces.

The new measures, dubbed the British Industry Supercharger, are designed to reduce the disparity in the price that the UK heavy industry pays for electricity compared to European competitors.

The government will hold a consultation in the spring on three main measures: reducing the network charges that industrial users pay for their supply of electricity; cutting costs associated with maintaining generating capacity; and looking at whether to increase exemptions on costs arising from renewable energy obligations from 85 per cent to 100 per cent.

The cost of the measures will eventually be funded through consumer bills, with the cost to the average household expected to be an extra £3-£5 a year.

Badenoch described the package as “carefully crafted support” which would mean “strategically important UK industries such as steel and chemicals remain competitive at the world stage”.

Dave Dalton, chair of the Energy Intensive Users Group, which represents industrial sectors with the heaviest energy consumption, welcomed the measures.

Others, however, said the interventions, while welcome, would come too late for some sectors.

“This is all very welcome but having to wait for more than a year for these measures to be implemented will not stop companies like British Steel making job cut announcements,” said a steel industry expert.

The package of support comes after British Steel on Wednesday announced it was set to close the coking ovens at its main site in eastern England with the loss of up to 260 jobs.

The company, which is owned by China’s Jingye Group, said “decisive action” was required to cope with the “unprecedented rise in operating costs, surging inflation and the need to improve environmental performance”.

The government has been in talks with British Steel and Tata Steel UK for months over a year combined £600mn support package To help the companies move to less carbon-intensive electric arc furnaces.

Both steelmakers have warned that they will struggle to meet the costs of the upgrade. The offer is contingent on further investment from both companies and a guarantee over jobs up to 2030.

British Steel said its energy bill rose by £120mn last year, and it also faced an increase of more than £70mn in its annual carbon costs. It is unclear whether the government’s latest announcement will prevent the closures.

British Steel’s decision would mean that it would have to import coke for its two blast furnaces at its Scunthorpe site. Coking ovens are used to turn coal into coke which is then burnt in blast furnaces to make steel. India’s Tata Steel operates Britain’s remaining two furnaces at its Port Talbot site in Wales.

Xifeng Han, British Steel’s chief executive, said the company had taken “action to reduce costs within our control; however, steelmaking in the UK remains uncompetitive when compared to other international steelmakers”.

“Our energy costs, carbon costs and labor costs are some of the highest across the world, which are factors that we cannot influence directly,” he added.

The decision was blasted by unions, who warned that closing the coke ovens could have a “catastrophic impact on jobs and steel production at Scunthorpe and the UK as a whole”.

British Steel, which Jingye bought in 2020, has previously warned of even larger job cuts, with a further 600 to 900 roles potentially under threat across all of its UK operations.

Jonathan Reynolds, Labor’s shadow business secretary, described the potential job losses announced on Wednesday as “more worrying news for our steelworkers who desperately need a government on their side securing the bright future our steel sector could have”.

The government said it was “very disappointing British Steel has chosen to take this step for its employees while our negotiations with the sector are ongoing”, adding that it stood “ready to support employees impacted by [the] decision.”

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