British Industrial Competitiveness Scheme

Lord Sharpe of Epsom Excerpts

Wednesday 22nd April 2026 Lords Chamber

Today’s announcement of our bigger, bolder scheme is proof positive of our commitment to backing British businesses for the long term. It sits alongside our continued focus on short-term impacts, on which we will not hesitate to act where needed. We will continue using our activist industrial strategy to create the right conditions for British firms to succeed and grow. We do so because we know that when the Government and enterprise work in partnership, we can make Britain stronger, wealthier and more resilient. I commend this Statement to the House”.

[Lord Sharpe of Epsom (Con)]

My Lords, the Minister will soon trumpet the British industrial competitiveness scheme as being very good for business. But, for all the rhetoric and self-congratulation, this policy will have no meaningful impact on the overwhelming majority of British businesses. By the Government’s own figures, around 99% of firms will see no benefit whatever. So while the Government speak grandly of intervention and support, the reality for most businesses—our small manufacturers, our family firms, pubs, farmers, retailers and countless others—is unchanged. They will go on facing the crippling costs that we heard about in the previous debate, with no help at all from this announcement. Even with the reliefs that have been announced, they are staggered, and the earliest will kick in only in April 2027.

What is the wider context in which this Statement must be judged? It is one not of support for enterprise but of cost, burden and damage inflicted by this Government on British industry. Employers have been hit by increased national insurance contributions. Businesses now face the additional costs of the Employment Rights Act, which, by their own admission, run into the billions, together with the further burden of expanded trade union access to workplaces. That is something many employers will regard, in practice, not as access but as a licence to raid workplaces, disrupt operations and undermine confidence. Having said that, we must acknowledge one delicious irony of the Employment Rights Act: the Prime Minister will be seeing the first high-profile victim of an uncapped unfair dismissal award, which we on these Benches warned about.

The Government will now seek to blame the war in the Middle East, but that explanation simply will not wash. Britain’s industrial electricity prices were already among the highest in Europe and around four times those in the United States—long before this latest crisis. These are not sudden or unforeseeable problems; they are the product of policy failure. They are the result of loading electricity bills with the cost of an energy system increasingly structured around subsidising intermittent renewables, managing grid constraints and paying for mechanisms such as contracts for difference. Those costs were there before the latest conflict, and industry has been warning about them for years.

In what sort of alternative reality does it make sense to have to come up with various schemes—this, the BICS, the supercharger package, the energy-intensive industries compensation scheme, the network charging compensation scheme and all the rest, all of which are of mind-bending complexity and designed to mitigate the effect of the Government’s own policies with taxpayers’ money?

Then we come to domestic energy production. At precisely the moment when Britain should have been strengthening resilience and insulating itself from geopolitical shocks, this Government have moved in the opposite direction. They have imposed a punitive 78% tax burden on North Sea oil and gas producers—a windfall tax on windfalls that, in many cases, simply do not exist. They have halted new licences at exactly the wrong moment, when domestic production is needed most to buffer Britain from volatility abroad. The Jackdaw gas field could provide 6% of Britain’s gas needs. As my noble friend Lord Moynihan noted in the previous debate, there is no case not to do this. The result is plain to see: jobs are being exported, gas is being imported, rigs are leaving, investment is frozen, and capital is fleeing to more stable and more welcoming jurisdictions. Hundreds if not thousands of skilled jobs are being lost and Britain is becoming more, not less, exposed.

The Government will soon blame the high international gas price, which is used to set the domestic electricity price two-thirds of the time. But, as any O-level student knows, increasing supply lowers prices. Will the Government therefore reverse the ban on these licences? Is not the simple truth that the Government have chosen to make this country more vulnerable to geopolitical shocks, including conflict in the Middle East, than it needed to be?

In the other place, the Secretary of State, Peter Kyle, said that this package would deliver for Britain’s manufacturing, but what have the Government done to British manufacturing? The manufacturing base has already been damaged by the Government’s disastrous steel strategy, which has raised the cost of both domestic and imported steel. That matters profoundly for sectors such as the automotive sector, where steel is not incidental but foundational. One cannot claim to back manufacturing on Monday while making core industrial inputs more expensive on Tuesday.

The Secretary of State also cited the support of the Society of Motor Manufacturers and Traders, but does the Minister accept that the motor industry is simultaneously being hit by other government policies that are doing real harm? The electric vehicle mandate is imposing enormous costs on manufacturers, and the industry itself has warned of a multi-billion-pound burden—around £6 billion by the SMMT’s own assessment.

The Government’s rhetoric is one thing, but the reality is quite another. They speak of backing British industry while, in practice, they are crushing parts of our industrial base under the combined weight of energy costs, regulation, mandates and taxation. Will the Government consider abolishing, or at least relaxing, the EV mandate to give much-needed relief to the British automotive sector?

Yes, we welcome the announcement that the carbon price support will be removed from April 2028, but if the Government now accept that this burden damages competitiveness, why on earth are they waiting until 2028? Why must British industry continue to suffer for another two years before any relief is given? British industry needs lower costs, a competitive tax regime and a Government who stop making this country harder in which to invest, to manufacture and to do business.

[Baroness Kramer (LD)]

My Lords, this debate picks up from the Oral Question earlier on the IMF, which warned that the global economy is losing momentum as a result of the Iran war, with the UK expected to be the hardest hit of the G7 economies. The Government need to rethink in the shadow of war, not just to watch and wait.

That brings me to BICS. We welcome plans to bring down some of the highest energy prices in the world, and we are pleased that BICS, which benefits 10,000 of the most energy-intensive businesses, will also provide a one-off payment to cover this year. However, the money will not actually come until next year, so when will those businesses, all of which have to plan ahead and need to know the details—indeed, many are negotiating a whole variety of contracts as we speak—find out exactly what they will get, including which benefits and when they will come?

Many other businesses are threatened by rising costs here and now. I am not clear that the Government have recognised the acute energy cost problems for food businesses and agribusinesses, which not only will have a huge impact on the cost of living of ordinary people but, as we are now starting to hear from some reports, might even lead in certain areas to food shortages. Surely this is a call to action, so what action can we expect?

Frankly, many SMEs, the backbone of our communities, are on the brink from many kinds of pressures, as the Government will be very much aware. SMEs are exposed to a deregulated energy market, with very little support to face it. There is widespread concern about a lack of competition, which has the effect of locking them out of good deals by which they can price energy more effectively. SMEs with more than 50 employees do not even have access to the Energy Ombudsman. The hospitality industry is an extreme case right now and, frankly, it is pretty desperate. Will the Government at the very least instruct the CMA to open an urgent investigation into the state of competition in the energy retail market for hospitality? Will they find some quick solutions for all the areas I have covered? We cannot afford for these industries to endure any more stress and potentially curtail or curb their business.

Of course SMEs need to achieve energy efficiency, but we all know that means upfront costs. Will the Government set up an energy security bank as a mechanism to provide SMEs with low-cost finance so that they can invest in energy tech? They can then repay that finance because of the savings they make, so it would be a sensible and appropriate way to generate a circle of financing. With that, we would need a real overhaul of the business rates system. At the moment, firms are penalised if they invest in productive energy saving investments made on their premises. This is surely the opposite of what the Government want. Will they take action on these fronts quickly?