Chancellor Rachel Reeves has warned that escalating conflict in the Middle East could ripple through the UK economy, as she launched Labour’s long-anticipated industrial strategy focused on boosting business competitiveness and easing energy costs.
Speaking alongside Prime Minister Keir Starmer and Business Secretary Jonathan Reynolds at Horiba Mira, an engineering company in Nuneaton, Reeves linked global instability to the domestic economic landscape.
“We want de-escalation because it’s the right thing for the Middle East, but we also want de-escalation because of the ramifications of conflict in the Middle East for the rest of the world, including the UK.”
Rachel Reeves
Pointing to rising global oil prices triggered by U.S. strikes on Iran, Reeves stressed the potential for knock-on effects at home. “We have seen increases in oil prices in recent days and weeks, which of course, will have an impact on the UK economy,” she added.
Although oil prices fell slightly by around 1% in London on Monday, the geopolitical threat remains. Iran’s possible retaliation, such as blockading the vital Strait of Hormuz oil corridor, continues to stoke uncertainty in global markets.
Energy Costs Targeted For Heavy Firms
Among the major proposals in Labour’s 160-page industrial strategy is a plan to slash electricity bills for Britain’s energy-intensive industries, long burdened with costs significantly higher than international competitors.
Rachel Reeves
“We recognise the challenge that businesses and families faced with energy costs, which is part of the reason why we’re doing what we’re doing today, but also why, for example, we’ve extended the warm homes discount to try to take money off people’s energy bills.”
Regarding U.S. President Donald Trump’s military action against Iran over the weekend, Reeves acknowledged concerns about Tehran’s nuclear ambitions.
“Sixty per cent enrichment of uranium is not for civil nuclear. And we’ve long shared those concerns.”
Rachel Reeves
To support industry, Labour plans to fund the electricity relief scheme by restructuring payments for renewable energy under “contracts for difference,” stretching costs over longer terms. Additional funds will come from future revenue growth under the emissions trading scheme, driven by rising carbon prices.
“We are talking about a major shift in competitiveness for the sectors covered by the new British industrial competitiveness scheme: it moves us from being an outlier right into the middle of the pack – cheaper than Italy, Czech Republic, broadly comparable to, say, Germany.
“There’s no increase in bills for anybody else and no implications for tax or borrowing from these policy interventions by the energy department that will create the headroom to allow us to exempt these businesses.”
Jonathan Reynolds
Reynolds stressed that this was not a siloed initiative: “This is not the Department for Business and Trade or the Treasury industrial strategy, this is the British government’s industrial strategy.”
The strategy identifies eight priority growth sectors, including advanced manufacturing, creative industries, and financial services. Supporting documents released Monday offered specific plans for five sectors, with proposals for defence, life sciences, and financial services expected ahead of Parliament’s recess.
Also confirmed in the strategy is the development of a new East Coast mainline station in the Bedfordshire village of Tempsford, part of the broader Oxford-Cambridge economic corridor.
Business groups have largely welcomed the strategy’s scope and ambition. Shevaun Haviland, Director General of the British Chambers of Commerce, called the blueprint “an important milestone towards creating a competitive economy that is fit for the future.”
Reynolds also noted additional measures, including an expanded British Business Bank, enhanced roles for metro mayors in regional economic planning, and a revamped strategy for preparing strategic investment sites.
With growing geopolitical risks threatening supply chains and energy prices, Labour is positioning its industrial strategy as a proactive step toward securing the UK’s economic resilience and long-term competitiveness.
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