UK Government puts cost reduction at forefront of new Industrial Strategy

UK Government puts cost reduction at forefront of new Industrial Strategy

The UK’s long-term plans for industrial development have been outlined, putting a strong focus on delivering cost reductions to businesses. The new Industrial Strategy Green Paper sets out the direction in which the Government will be heading.

This Green Paper, however, is just the preface for a consultation, before a formal strategy is defined. The Industrial Strategy, published by the Department of Business Energy and Industrial Strategy (BEIS) and HM treasury, sheds light on Government’s future priorities. It sets out ten pillars underpinning their approach. In a speech to mark the launch, Theresa May emphasised a desire to keep costs down as much as possible for businesses. Delivering affordable energy and cost controls on decarbonising the economy is a key part of the initial consultation. It aims to bring necessary stability for business to make future investment decisions.

  • Launching an Environmental Roadmap:
    • The Green Paper states the Government will unveil an Environmental Roadmap later this year. This will define how to minimise the energy costs of decarbonisation for businesses and households. It will also provide detail on plans to enhance energy efficiency and reduce the impact of renewables, such as offshore wind, on energy bills. Efficient operation of the country’s networks and energy markets will also be covered. As well as plans to increase resource and energy productivity, as a means to contain or reduce energy costs.
  • Research and Innovation:
    • The Industrial Strategy also focuses on enhancing research and innovation. This includes the development of a new Industrial Strategy Challenge Fund. It will offer Government support and finance to smart energy technologies and storage. The funding forms part of the £4.7bn investment in Research & Development outlined by the Chancellor in the Autumn Statement.
  • Realigning the Energy Trilemma:
    • As well as bringing cost reductions for consumers, the new Industrial Strategy is designed to give business and industry a greater role within the energy ‘trilemma’. The current trilemma (a three-pronged dilemma) centres on balancing the need for energy security with energy affordability and sustainability. How the Government intends to enhance its plans is unclear at the moment. Increased focus on businesses and bills would place additional strain on the Government’s sustainability goals. This could lead to problems in other areas of UK industry.

The Roadmap will be followed by a 25-year environment plan. It is hoped this will bring more clarity on the way they aim to deliver their objectives.

Utilitywise welcomes Government plans to make consumer bills a priority. However, we await full details as to how this will be achieved. Formal policies will need to reflect the early aims and objectives outlined in this Green Paper. It remains to be seen what exactly can be done to cut costs.

Battling non-commodity costs

The top objective is greater cost reduction across the industry. However, there are a number of costs that the Government cannot get away from. In particular, its support for renewables. Funding for renewable energy projects, through schemes such as the Renewables Obligation (RO) and Contracts for Difference (CfD), represent legacy costs which must be recovered. This is done through a levy on customer bills and there is little scope for reduction. Utilitywise has already outlined the extent to which non-commodity costs are rising. The Government has announced it aims to further reduce the cost of offshore wind, once support contracts have ended. While this will reduce the costs, the older agreements at higher costs will still have to be honoured. Any further subsidy payments will still be passed on to consumers.

Gain control of your energy bills

The Government’s Industrial Strategy has clear positive intentions. However, it remains the case that a business’s greatest asset on cost reduction is control of its own energy use. In the case of non-commodity costs, there is often very little consumers can negotiate regarding these elements of their bill. However, methods to produce clear cost reductions on your bill that you can influence include:

  • better management of energy consumption
  • controls on time of use
  • negotiating improved deals with suppliers when the time is right

Utilitywise can help you take control of your utility consumption with a range of controls and reductions services. This ensures you can better manage your usage, and avoid the sting of increased charges. We have the tools and technology that can give power back to you. To find out more visit our website, call 01527 511 757 or email corporate@utilitywise.com.

Ross Moffat

Posted by on Wednesday, the 1. February at 12.13

Ross Moffat has been a part of the Market Intelligence team at Utilitywise since early 2014. His responsibilities include delivering Market Intelligence reports to clients and managing the Utility Insights Twitter account.Ross has a first class Honours degree in Business and Marketing from the University of Stirling.