UK to Cut Business Energy Bills in Pre-Budget Charm Offensive
(Bloomberg) -- The UK will cut energy bills by 25% for more than 7,000 manufacturers beginning in 2027 as the government attempts to charm businesses ahead of a tax-raising budget next week.
The program will apply to eligible businesses in high-growth sectors such as the automotive, aerospace and chemical industries, Business Secretary Peter Kyle plans to announce Monday at the Confederation of British Industry’s conference in London. A consultation to determine which businesses are eligible begins on Monday.
“In recent years, our most promising innovators and industries have been hamstrung by some of the highest electricity prices in the G7 and poor access to finance,” Kyle said. “That’s been a drag anchor on growth. A drag anchor on innovation.”
The program will reduce companies’ bills by around £35 ($45.854) per megawatt hour, or as much as 25%, from April 2027, Kyle’s department said. He will also unveil a strategy to ensure the government-owned British Business Bank can invest larger amounts in domestic scale-ups.
Last year, Chancellor Rachel Reeves hit companies with a surprise hike to national insurance, denting business confidence. Kyle has advocated sparing businesses another sharp tax hit in the budget on Wednesday in discussions with the Treasury in recent weeks, according to people familiar with the matter.
Reeves is expected to raise a number of smaller taxes at her budget to help raise as much as £30 billion ($39.3 billion) to stabilize the public finances, after opting against raising income tax, which risked political backlash by breaking a key election promise.
These have been widely reported to include a freeze on income tax and national insurance thresholds for two more years, a new per-mile tax on electric vehicle usage, a gambling tax and a so-called mansion tax. The Times reported that an increased council tax rate would apply to properties over £2 million.
The Treasury announced a series of affordability measures and giveaways over the weekend, as Reeves looks to frame her budget as easing cost-of-living pressures in an attempt to tackle inflation.
The budget will freeze rail fares and include a package to help reduce household energy bills and food prices. UK inflation fell for the first time in seven months in October.
Reeves vowed to “grip inflation” in a weekend piece for the Sunday Times. “At the budget I will take direct action to ease the cost of living for all households,” she said.
Pensioners will receive an above-inflation pay rise, amounting to an uplift of more than £550 a year and the two-child benefit cap will be lifted at the cost of £3 billion, to help tackle child poverty. The giveaways come alongside a pledge to save an additional £1.2 billion by reducing fraud in the welfare system by 2031.
The Labour government, which has suffered a sharp decline in support over the past year, is also hoping such measures will appeal to voters by easing price pressures as well as its support base, which has been urging more policies to tackle child poverty and the cost of living.
Reaction to this budget is likely to prove critical for Labour’s political fortunes, as it looks set to suffer heavy losses at local elections in May next year.
Reeves also intends for such giveaways to offset less popular measures expected like freezing tax thresholds and capping the tax-free amount people can invest in their pension pot. The Telegraph on Sunday also reported that Reeves is likely to increase alcohol duty by more than 4%.
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