Britain mulls subsidies for big electricity users 

Forecasts of a long recession and soaring inflation, spurred mainly by rising energy prices, dominate the political agenda

The British government said it has launched a consultation into a support scheme that could raise the exemption for businesses from certain environmental and policy costs from 85% of costs up to 100%.

Britain is considering plans to subsidise power bills for energy-intensive industries such as steel and cement, in an effort to support hundreds of businesses facing record high energy prices.

The move comes weeks before a new prime minister is due to take office, with forecasts of a long recession and soaring inflation — spurred mainly by rising energy prices — dominating the political agenda.

The British government said it has launched a consultation into a support scheme that could raise the exemption for businesses from certain environmental and policy costs from 85% of costs up to 100%.

"With global energy prices at record highs, it is essential we explore what more we can do to deliver a competitive future for those strategic industries so we can cut production costs and protect jobs across the UK," said business minister Kwasi Kwarteng.

The plans, which could help some 300 businesses that support 60,000 jobs, reflect Britain's higher industrial electricity prices compared with those elsewhere in Europe, said the department for business, energy and industrial strategy.

British wholesale gas prices remain elevated after hitting record highs following Russia's invasion of Ukraine.

'Significant step'

The steel industry welcomed the proposals, calling the consultation a "significant step" that should provide much-needed relief amid "extremely challenging circumstances".

"Launching this consultation now provides the future government with the option to introduce this scheme given current high electricity prices," said Gareth Stace, director general of industry body UK Steel.

The consultation comes four months after the government extended by three years a compensation scheme that provided high energy-using businesses with support for electricity costs.

Ruth Gregory, senior UK economist at Capital Economics, said that the latest GDP figures confirmed that Britain was heading into recession later this year  

Friday's figures for the second quarter were hugely complicated by the effects of spending around the jubilee bank holiday. 

"However, this will just be a temporary pick-up. Even allowing for this, we still think the economy will contract by 0.2% quarter-on-quarter in the third quarter and that a recession is on the way later this year," said Ms Gregory.

• Reuters. Additional reporting Irish Examiner.