Rachel Reeves has expanded plans to cut electricity bills for thousands of UK manufacturing firms as she continues talks in Washington focused on the economic fallout from the Iran conflict.
The Chancellor, who is in Washington for the International Monetary Fund (IMF) spring meetings, said the plan will help UK businesses compete and create jobs despite the uncertain economic backdrop.
During her trip, she has stepped up criticism of US-Israeli military action in Iran, saying war was a “mistake” and has not made the world a safer place.
Her comments came as she was due to meet US treasury secretary Scott Bessent, who has referred to the impact of the war as “short-term volatility for long-term gain” which he said would prevent Tehran developing a nuclear weapon.
Ms Reeves also cautioned against knee-jerk responses to the cost-of-living crisis triggered by the war in a joint statement with international counterparts at the IMF.
In a bid to help businesses hit by rising costs, a plan announced last summer to cut electricity bills by up to 25% for more than 7,000 UK businesses will be expanded to cover 10,000 firms.
The British Industrial Competitiveness Scheme (BICS) will cut costs by up to £40 per megawatt-hour from 2027 by exempting businesses from certain extra charges that currently support green energy and back-up power supply systems.
An additional one-off payment in 2027 will be given to an extra 3,000 businesses, including companies in the automotive, aerospace, steel and pharmaceuticals sectors.
The Government said it will also cover the support firms would have received if the BICS had been in place from this month.
The scheme is expected to be worth up to £600 million per year from next April.
Ms Reeves said: “This Government has the right plan for the economy: backing British industry, cutting electricity costs and building a stronger, more resilient future.
“Today’s announcement will cut energy bills for over 10,000 manufacturers, helping businesses to compete, win and create good jobs across the country, and to deliver our modern industrial strategy.”
Business Secretary Peter Kyle said: “We are a Government of action, and when global instability puts businesses under pressure we’ll always do what’s needed to support them and ensure Britain’s resilience.
“By extending the reach of BICS by 40%, we’re acting decisively to tackle the number one issue that businesses face head-on.”
Household energy bills are forecast to increase this year because of the conflict pushing up global oil and gas prices, while motorists are already feeling the impact of higher costs at the pump.
Ms Reeves has signalled that any energy bill help this year will be targeted at the poorest households, rather than a universal bailout of the type offered by Liz Truss when she was prime minister after the Russian invasion of Ukraine.
The White House has said talks are ongoing about holding fresh face-to-face negotiations between the US and Iran and that Washington had not yet formally requested an extension of the ceasefire due to expire next Tuesday.