Ministers are considering a commitment to cut soaring industrial energy prices for British companies to the same level enjoyed by competitors in France and Germany as part of its industrial strategy.
Sky News understands proposals to make energyprices more competitive are at the heart of final discussions between the Department for Business and Trade and the Treasury ahead of the publication of its industrial strategy on Monday.
Industrial electricity prices in the UK are the highest in the G7 and 46% above the median for the 32 member states of the International Energy Agency, which account for 75% of global demand.
Image: Industrial electricity prices by country
In 2023, British businesses paid £258 per megawatt-hour for electricity compared to £178 in France and £177 in Germany, according to IEA data. Matching those prices will require a reduction of around 27% at a cost of several billion pounds.
Earlier this month, automotive giant Nissan said UK energy prices make its Sunderland plant its most expensive in the world.
Business secretary Jonathan Reynolds is understood to be sympathetic to business concerns, and chancellorRachel Reeves told the CBI’s annual dinner the issue of energy prices “is a question we know we need to answer”.
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Extending relief
While around 350 companies in energy-intensive industries, including steel, ceramics and cement, enjoy some relief from prices through the energy supercharger scheme, which refunds 60% of network charges and is expected to rise to 90%, there is currently no support for manufacturers.
Sky News understands ministers are considering introducing a similar scheme to support the 200,000 manufacturing businesses in the UK.
Cutting network costs entirely could save more than 20% from electricity prices.
The mechanism for delivering support is expected to require consultation before being introduced to ensure only businesses for whom energy is a central cost would benefit. This could be based on the proportion of outgoings spent on energy bills.
It is not clear how the scheme would be funded, but the existing industrial supercharger is paid for by a levy on energy suppliers that is ultimately passed on to customers.
A central demand
Bringing down prices, particularly for electricity, has been the central demand of business and industry groups, with Make UK warning high prices are rendering businesses uncompetitive and risk “deindustrialising” the UK.
The primary driver of high electricity costs in the UK is wholesale gas, which both underpins the grid and sets the price in the market, even in periods when renewables provide the majority of supply.
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Wholesale prices account for around 39% of bills, with operating costs and network charges – the cost of using and maintaining the grid – making up another 25%, and VAT 20%.
Business groups, including the manufacturers group Make UK, have called for a reduction in those additional charges, as well as the so-called policy costs that make up the final 16% of bills.
Image: UK industrial electricity prices
These are made up of levies and charges introduced by successive governments to encourage and underwrite the construction of renewable sources of power.
Make UK estimate that shifting policy costs into general taxation would cost around £3.8bn, but pay for itself over time in increased growth.
Government sources confirmed that energy prices are a central issue that the industrial strategy will address, but said no final policy decisions have been agreed.
The industrial strategy, which is delayed from its scheduled publication earlier this month, will set out the government’s plans to support eight sectors identified as having high-growth potential, including advanced manufacturing, life sciences, defence and creative industries.
Four people have been arrested by police investigating cyber attacks targeting M&S, Co-op and Harrods.
A 20-year-old woman and two males, both aged 19, and a male aged 17, were detained in London and the West Midlands this morning as part of a National Crime Agency (NCA) operation.
They were arrested at their homes on suspicion of Computer Misuse Act offences, blackmail, money laundering and participating in the activities of an organised crime group.
Electronic devices were seized from the suspects and are currently being analysed by forensic experts.
M&S halted online orders, and shelves were empty in shops after the cyber attack on the retailer earlier this year.
The initial hack into the retailer’s systems took place in April through “sophisticated impersonation” involving a third party.
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Disruption is expected to continue at the retailer until the end of this month.
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Mickey Carroll in May answered why M&S cyber attack was so bad.
The Co-op and Harrods were also subsequently targeted by hackers.
Paul Foster, head of the NCA’s National cybercrime unit described the arrests as a “significant step” in their investigation, which remains “one of the Agency’s highest priorities”.
He added: “…our work continues, alongside partners in the UK and overseas, to ensure those responsible are identified and brought to justice.”
The National Crime Agency is keen to “signal” to “future victims” the “importance of seeking support and engaging with law enforcement”, stating that “the NCA and policing are here to help”.
The NCA has also thanked M&S, Co-op and Harrods for their support in their investigations.
The arrests, which took place early on Thursday morning, were supported by officers from the West Midlands Regional Organised Crime Unit and the East Midlands Special Operations Unit.
Earlier this week, the chairman of M&S told MPs that the hack had been “traumatic” and like an “out-of-body experience”.
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Archie Norman, however, refused to be drawn on whether the retailer had paid any ransom.
“We are not discussing any of the details of our interaction with the threat actor, including this subject, but that subject is fully shared with the NCA,” he said.
A New York-listed company with a valuation of more than $21bn is to snap up Space NK, the British high street beauty chain.
Sky News has learnt that Ulta Beauty, which operates close to 1,500 stores, is on the verge of a deal to buy Space NK from existing owner Manzanita Capital.
Ulta Beauty is understood to have registered an acquisition vehicle at Companies House in recent weeks.
Royal Mail had repeatedly failed to meet the so-called universal service obligation to deliver post within set periods of time.
Those delivery targets are now being revised downwards.
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Rather than having to have 93% of first-class mail delivered the next day, 90% will be legally allowed.
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The sale of Royal Mail was approved in December
The target for second-class mail deliveries will be lowered from 98.5% to arrive within three working days to 95%.
A review of stamp prices has also been announced by Ofcom amid concerns over affordability, with a consultation set to be launched next year.
It’s good news for Royal Mail and its new owner, the Czech billionaire Daniel Kretinsky. Ofcom estimates the changes will bring savings of between £250m and £425m.
A welcome change?
Unsurprisingly, the company welcomed the announcement.
“It is good news for customers across the UK as it supports the delivery of a reliable, efficient and financially sustainable universal service,” said Martin Seidenberg, the group chief executive of Royal Mail’s parent company, International Distribution Services.
“It follows extensive consultation with thousands of people and businesses to ensure that the postal service better reflects their needs and the realities of how customers send and receive mail today.”
Citizens Advice, however, doubted whether services would improve as a result of the changes.
“Today, Ofcom missed a major opportunity to bring about meaningful change,” said Tom MacInnes, the director of policy at Citizens Advice.
“Pushing ahead with plans to slash services and relax delivery targets in the name of savings won’t automatically make letter deliveries more reliable or improve standards.”
Acknowledging long delays “where letters have taken weeks to arrive”, Ofcom said it set Royal Mail new enforceable targets so 99% of mail has to be delivered no more than two days late.
Changing habits
Less than a third of letters are sent now than 20 years ago, and it is forecast to fall to about a fifth of the letters previously sent.
According to Ofcom research, people want reliability and affordability more than speedy delivery.
Royal Mail has been loss-making in recent years as revenues fell.
In response to Ofcom’s changes, a government spokesperson said: “The public expects a well-run postal service, with letters arriving on time across the country without it costing the earth. With the way people use postal services having changed, it’s right the regulator has looked at this.
“We now need Royal Mail to work with unions and posties to deliver a service that people expect, and this includes maintaining the principle of one price to send a letter anywhere in the UK”.
Ofcom said it has told Royal Mail to hold regular meetings with consumer bodies and industry groups to hear their experiences implementing the changes.