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The government has pledged nearly £22bn to fund projects that capture greenhouse gases from polluting plants and store them underground, as it races to reach strict climate targets.

The plans are designed to generate private investment and jobs in Merseyside and Teesside, two industry-heavy areas that will be home to the new “carbon capture clusters”.

Prime Minister Sir Keir Starmer said the move was “reigniting our industrial heartlands by investing in the industry of the future”, though there are questions about how best to use this expensive technology.

Carbon capture, utilisation and storage (CCUS) has been developed to combat climate change.

It captures the planet-warming carbon dioxide released from burning fossil fuels or from heavy industry, and puts it to use or stores it underground.

How CCUS can work, by capturing the carbon dioxide emissions from something like a gas plant or cement factory, transporting them through existing gas pipes, and storing them in a depleted oil or gas field under the sea.
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How CCUS can work, by capturing the carbon dioxide emissions from something like a gas plant or cement factory, transporting them through existing gas pipes, and storing them in a depleted oil or gas field under the sea

It is expensive and difficult, but the UK’s climate advisers, the Climate Change Committee (CCC), and United Nations scientists say it is essential to get the world to net zero, which the UK is targeting for 2050.

Net zero means cutting emissions as much as possible and offsetting or capturing the stubborn remaining ones.

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Today the government has committed up to £21.7bn over 25 years, to be given in subsidies to sites in the Teesside and Merseyside “clusters” – from 2028.

Analysis: After warning of tightened purse strings, the public may well be perplexed by Reeves

It will be split between three projects, which are capturing carbon dioxide released either from making hydrogen, generating gas power or burning waste to create energy from 2028.

The gas – up to 8.5 million tonnes of carbon emissions – will be locked away in empty gas fields in the Liverpool Bay and the North Sea.

The government hopes it will attract £8bn in private investment, create 4,000 direct jobs and support a further 50,000.

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Can carbon capture help fight climate change?

The cash will pay for fewer projects than hoped – the last government suggested a £20bn pot of money for similar projects – but the new administration says those plans weren’t properly costed, and the funding hadn’t been allocated.

The funding is to come from a mixture of Treasury money and energy bills, but the government has been coy about the split so far.

Sir Keir said the announcement will “give industry the certainty it needs” and “help deliver jobs, kickstart growth, and repair this country once and for all”.

Will it help jobs and business?

It hopes to fund the first large scale hydrogen production plant in the UK, and help the oil and gas sector and its transferable skills move over to green industries.

It has been welcomed by industry and the unions, coming just a week after job losses from the closures of Port Talbot Steelworks and Ratcliffe coal power station.

GMB general secretary Gary Smith said the news “shows what levelling up can really mean: good, well paid jobs reinvigorating communities”.

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Does carbon capture, utilisation and storage (CCUS) work?

CCUS has made slow progress: promised for decades but barely scaled, with just 45 commercial sites globally.

However, it began to pick up in the last few years, with 700 plants now in some stage of development around the world.

The world’s first CCUS plant has stored CO2 under Norway’s waters since 1996, though elsewhere a few concerns linger about whether some projects leak gas.

James Richardson, acting chief executive of the CCC, said: “We can’t hit the country’s targets without CCUS, so this commitment to it is very reassuring”.

How should CCUS be used?

Some believe expensive CCUS should be preserved for areas like cement or lime-production, that are very hard to clean up in any other way, rather than for sectors for which there are greener alternatives.

Greenpeace UK’s Doug Parr warned of a “risk of locking ourselves into second-rate solutions”.

The government hopes this funding for the three sites that are ready to go will lay the foundations for further CCUS projects.

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Bosses rail at business secretary over ‘avalanche of costs’

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Bosses rail at business secretary over 'avalanche of costs'

Business leaders expressed frustration with ministers on Monday amid a growing budget backlash that bosses said would trigger an “avalanche of costs” and leave them with no choice but to slash investment and increase prices.

Sky News has learnt that bosses of large retail and hospitality companies and trade associations told Jonathan Reynolds, the business secretary, that last week’s budget risked damaging consumer confidence and exacerbating challenges facing the UK economy.

Among the dozens of companies represented on the call are said to have been Burger King UK, Fuller Smith & Turner, Greene King, Kingfisher and the supermarket chain Morrisons.

Mr Reynolds is said to have acknowledged that Rachel Reeves‘s inaugural fiscal statement had “asked a lot” of British business, with James Murray, the financial secretary to the Treasury, understood to have described it as “a once-in-a-generation budget”, according to several people briefed on the call.

Business and Trade Secretary Jonathan Reynolds arrives in Downing Street.
Pic: PA
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Jonathan Reynolds. Pic: PA

One insider said that Nick Mackenzie, the chief executive of Greene King, had highlighted that the increase in employers’ national insurance (NI) contributions would cause “a £20m shock” to the company, while Fullers is understood to have warned that it would be forced to halve annual investment from £60m to £30m as a result of increased cost pressures.

Rami Baitieh, the Morrisons chief executive, told Mr Reynolds that the budget had exacerbated “an avalanche of costs” for businesses next year, and asked what the government could do to mitigate them.

Sources added that the CBI, the employers’ group, said its impact would be “severe”, while the British Beer & Pub Association added that there was now a disincentive to invest and flagged “a tsunami” of higher costs.

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How will the budget affect businesses?

The range of comments on the call with ministers underlines the scale of discontent in the private sector about Labour’s first budget for nearly 15 years.

Only a small number of interventions during the discussion are said to have been in support of measures announced last week, with the Federation of Small Businesses understood to have praised the doubling of the employment allowance, which would see many of the smallest employers having their NI bills cut by £2,000.

The Department for Business and Trade has been contacted for comment, while none of the companies contacted by Sky News would comment.

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Retail giants face food price hikes dilemma after budget

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Retail giants face food price hikes dilemma after budget

Two of Britain’s biggest food retailers will this week face pressure to publicly disclose whether they expect a fresh spike in prices next year as the industry grapples with huge tax hikes imposed in last week’s budget.

Sky News understands that Marks & Spencer (M&S), which will unveil half-year earnings on Wednesday, and J Sainsbury, which reports interim results the following day, are collectively facing an additional bill of close to £200m as a result of changes to employers’ national insurance contributions (NICs) announced by Rachel Reeves, the chancellor.

Industry sources said the pressure on pricing would be “intense” given the thin margins on which the big supermarkets already operate.

“Food price increases from next April are inevitable,” said one.

The warning comes a day after Ms Reeves told Sky News that “businesses will now have to make a choice, whether they will absorb that through efficiency and productivity gains, whether it will be through lower profits or perhaps through lower wage growth”.

Pointedly, she did not highlight the prospect of higher prices at the tills, with some retailers now weighing whether to explicitly blame the government for impending price increases – a move which will trigger renewed inflation in the UK economy.

The grocery industry is expected to be among the hardest-hit by the changes to employer NICs, particularly after the chancellor slashed the threshold at which businesses become liable for it to just £5,000.

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Tens of thousands of people employed part-time in the sector earn between that sum and the current threshold of £9,100.

The first major retailer to report financial results since the budget will be Primark’s parent, Associated British Foods (ABF), on Tuesday.

Insiders downplayed the risks of price hikes from Primark given its track record of absorbing inflationary pressures without passing them on to consumers.

ABF’s additional employer NICs bill is expected to be in the region of £25m, according to one analyst.

Overall, the retail sector could end up paying billions of pounds of additional tax given the scale of its workforce.

Ms Reeves has vowed to raise £25bn extra annually from the changes to employer NICs.

In addition to that, the rise in the national living wage will add a further burden to the financial pressures facing the retail industry.

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Prior to the budget, Stuart Machin, the M&S chief executive, urged the chancellor not to increase taxes on it, calling them “a short-term, easy fix”.

“When I hear about plans to increase national insurance, a tax with no link to profit which hits bigger employers like us and our smaller suppliers, I’m concerned.

“The chancellor was right in the past to call national insurance a tax on workers.”

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Jonathan Reynolds, the business secretary, will hold talks with British business leaders later on Monday about the impact of the budget.

A number of executives will be given the opportunity to ask questions on a call in which more than 100 companies are expected to be represented, although one boss who is critical of many of the budget measures said they were likely to be prevented from voicing their concerns publicly on the call.

ABF, M&S and Sainsbury’s all declined to comment.

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Zahawi in talks to help Efune clinch £550m Telegraph takeover

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Zahawi in talks to help Efune clinch £550m Telegraph takeover

The former Conservative chancellor Nadhim Zahawi is in talks to smooth the path to a takeover of The Daily Telegraph being led by the New York-based media investor Dovid Efune.

Sky News has learnt that Mr Zahawi has been working for several weeks with LionTree, Mr Efune’s investment banking adviser, on the deal, which is expected to be worth in the region of £550m.

City sources said on Monday that Mr Efune, proprietor of the New York Sun, was exploring securing a portion of funding for the takeover from Sir Mohamed Mansour, the former Tory treasurer.

In September, Sky News revealed that Sir Mohamed had been approached to provide as much as £150m to a standalone bid for the Telegraph titles that was being spearheaded by Mr Zahawi.

Mr Efune subsequently secured a period of exclusivity to finalise a deal before the end of November, and is now lining up financial backers to help clinch the deal, aided by the former Tory chancellor.

If completed, the transaction will crystallise an unlikely profit for RedBird IMI, the Abu Dhabi-backed vehicle which paid £600m to acquire a call option that was intended to convert into ownership of the Telegraph newspapers and The Spectator magazine.

One source said that depending on the final structuring of the deal, it could be worth as much as £575m

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The Spectator was recently sold for £100m to Sir Paul Marshall, the hedge fund billionaire, who has installed Michael Gove, the former cabinet minister, as its editor.

Insiders said that Mr Zahawi was likely to be handed an ongoing role at the Telegraph if the bid from Mr Efune was successful.

Nadhim Zahawi. Pic: PA

The former chancellor, education secretary and vaccines minister has been involved in the Telegraph process in various guises, initially helping broker a deal with RedBird IMI before assembling his own offer.

He has close connections to many of the Gulf-based figures involved in the process, including Sultan Ahmed al-Jaber, chairman of the bidding vehicle.

Mr Zahawi has also since been named chairman of Very Group, the online retailer owned by the Barclay family which controlled the Telegraph for two decades, and which is now part-funded by IMI.

The UAE-based IMI, which is controlled by the UAE’s deputy prime minister and ultimate owner of Manchester City Football Club, Sheikh Mansour bin Zayed Al Nahyan, extended a further £600m to the Barclays to pay off a loan owed to Lloyds Banking Group, with the balance secured against other family assets.

Spokesmen for Mr Efune, Sir Mohamed and RedBird IMI all declined to comment on Monday, while Mr Zahawi could not be reached for comment.

The former minister has said little publicly about his interest in a role at the Telegraph, although he did tell Sky News presenter Sophy Ridge in September that it “would be an incredible honour for me, a real privilege if I were ever to… chair the Telegraph [or] be involved with [it]”.

Sir Mohamed, who has donated millions of pounds to the Tories, was knighted earlier this year – a move which was lambasted by critics of the honours system.

His family office, Man Capital, is the second-biggest shareholder in the coffee shop chain Caffe Nero, while he owns San Diego FC, a new Major League Soccer franchise which will make its debut next year.

The London-based billionaire was the Tories’ senior treasurer from late 2022 until this year’s general election.

Mr Efune’s bid has raised the extraordinary possibility of a return to the British newspaper group for Conrad Black, its former proprietor, Sky News reported earlier in the autumn.

Lord Black, who ceased to be a member of the House of Lords earlier this year on the grounds of his non-attendance, writes regular opinion pieces for the digital title and was a founding director of its publisher.

For decades, Lord Black was a colossal figure in the newspaper industry both in Britain and beyond, overseeing titles at Hollinger International which included the Telegraph, The Jerusalem Post and the Chicago Sun-Times.

He acquired an initial stake in the Telegraph group in 1985, before gaining full control later that year.

After being convicted in 2007 of fraud and obstruction of justice, he spent three-and-a-half years in prison, and in 2019 was pardoned by President Trump.

Other bidders for the Telegraph included National World, the London-listed vehicle headed by former Mirror newspapers chief David Montgomery, and Lord Saatchi, the former advertising mogul, who offered £350m.

Lord Rothermere, the Daily Mail proprietor, pulled out of the bidding earlier in the summer amid concerns that he would be blocked on competition grounds.

The Telegraph auction is being run by Raine Group and Robey Warshaw, the advisers to the Abu Dhabi-backed entity which was thwarted in its efforts to buy the media titles by a change in ownership law.

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