Business Secretary can’t commit to lower energy costs in industrial strategy
Business Secretary Jonathan Reynolds was unable to confirm whether the government’s upcoming industrial strategy will include a roadmap to lower industrial energy costs and help for businesses wrestling with high prices.
Reynolds faced questions from MPs on the Business and Trade committee yesterday over whether he could guarantee lower costs for industry.
He told the committee: “I can’t preempt the decisions we are making as they’re linked to the spending review” but assured the committee that “it’s an area of considerable government activity.”
The UK’s lack of energy independence has left it more exposed to volatility in international markets than its European neighbours.
Reynolds and Investment Minister Poppy Gustafsson were grilled by the committee on why energy prices are “60 percent higher … than in the EU.”
Reynolds pushed back against the claim that high energy costs are linked to the clean power mission, insisting they are the result of how energy prices are set by the gas market, which cannot be simply decoupled.
Gustafsson said the key impediments investors and businesses cite are “granular issues” – namely energy prices and skills shortages.
She denied that business rates are a major concern, saying: “what they [investors] are really hungry for is clarity … they want to know government is applying consistent policy … and [want to] know what’s coming in the future.”
Gustafsson said that the industrial strategy set out the government’s plans for key sectors, allowing companies to plan for their own “horizons.”
Deregulation agenda
The committee raised the issue of UK regulators cutting across each other. According to Spencer Livermore, financial secretary to the Treasury, who was also being questioned, there is a conception of “regulation being a black box,” which “just emerges.”
Livermore said the government was working on having a “one lead regulator model,” an initiative being pushed jointly by the Treasury and Cabinet Office, to coordinate regulation.
Gustafsson said that the messaging around regulators being a “partner” in the government’s growth mission has been well-received by businesses and investors.
She added that they “want to feel they will be given the space to be able to grow their business and to work … they love the conversation around what’s happening in terms of the planning space, and making that far simpler and easier, and that’s gone down very positively,” as it’s indicated there is a “genuine desire” on the part of government to support and unlock growth.
Survival of the fittest
Reynolds said he is “unremittingly optimistic about the UK,” telling MPs “I am optimistic not based on sentiment or the brilliant visits and people I get to speak to everyday. I am optimistic because of what I see as the hardheaded opportunities available to us.”
The role of the industrial strategy, for Reynolds, is to “move the dial on growth” by recognising that “a disproportionate amount of the growth we’ve had in the UK … has come from about a third of our highest productivity sectors.”
Reynolds said the UK must prioritise these sectors, like the US does with its tech sector, and to not be seen as “defensive.”
“We want innovation, we want dynamism,” Reynolds said, attributing obstacles in growth to a lack of dynamism: “we want the strongest firms to be challenging, to be getting greater market share, to be leading in those areas.”
Reynolds also said the industrial strategy is relevant to the government’s new immigration plan, as it will help identify where there are skills gaps in the workforce, and how these can be plugged: “using the sectors of the industrial strategy to look at where we need to think about people coming to the UK, how does that match our economic needs?”
For Jacqui Smith, Minister for Women and Equalities, who was also giving evidence, “some of those areas that are most important to our growth, also see the largest skills gaps; construction, information and communications, technology, engineering, for example.”
The industrial strategy, which will set out the government’s overarching plan for how to drive growth in sectors like manufacturing, financial services and clean energy, is set to be published this June.