British manufacturers should be freed from paying the Government’s net zero taxes to reduce their “eye-watering” energy bills, factory owners have urged.

Make UK, which represents manufacturers, has told ministers to expand a subsidy scheme which reduces green energy taxes to tens of thousands more companies across the country.

Under the current scheme – announced by Peter Kyle, the Business Secretary, in June – energy intensive companies can be exempted from paying green levies such as the Renewables Obligation and the Feed-in Tariff.

The exemption was offered to 7,000 of the UK’s most energy intensive companies – but Make UK wants the proposal, known as the British Industrial Competitiveness Scheme, expanded to every one of the UK’s 115,000 manufacturers.

Make UK also warned the planned relief risks coming too late to save many companies, with the discounts not starting until 2027.

Stephen Phipson, the chief executive of Make UK, said: “The clock is ticking on tackling our eye-watering energy costs and it is now more a case of political will rather than any technical constraints to addressing these.

“It is imperative that the planned scheme is not only extended to all manufacturers but brought forward.”

The Government has claimed the programme would cut bills for some businesses by up to 25pc, but Make UK warned current plans risked leaving swathes of British industry at risk of “managed decline”.

In proposals shared with the Treasury and the Department for Energy Security and Net Zero, Make UK called on the Government to expand the discounts.

Make UK said the total cost of such an extension would be £3.3bn but that a wider subsidy would benefit the economy with similar levels of growth and allow more businesses to survive the energy transition.

It added that elevated carbon prices could help bring in hundreds of millions of pounds of additional revenues for the Government by 2030, which would also cover some of the cost of the programme.

UK manufacturers face some of the highest energy bills in the world, with electricity costing 60pc higher than most International Energy Agency members.

These punitive costs have led to a steady drum beat of warnings that Britain’s remaining manufacturing base faces a battle for survival.

In September, Sir Jim Ratcliffe’s chemicals group Ineos said it would halt all new UK investment, blaming spiralling energy bills and higher taxes.

Rachel Reeves, the Chancellor, has reportedly been exploring a multi-billion pound package to bring down energy costs as part of her Budget on Nov 26, with bills for a typical household set to rise by £111 from April.

This has included exploring a 5pc VAT cut on domestic gas and electricity bills.

In a letter last week, more than 60 groups including Octopus Energy and Eon urged the Chancellor to prioritise bringing down electricity bills, rather than gas costs, and to remove more green energy levies.

Make UK warned that without intervention aimed at businesses, Britain will face “higher energy costs, weaker investment and the managed decline of key industries”.

Fresh data on Sunday showed business output only marginally improved last month. BDO’s Output Index, a survey of 4,000 businesses, rose to 97.49 from 96.25 in September, implying a minor increase in performance.

A government spokesman said: “We know the cost of energy is one of the greatest challenges facing industry – and this Government is acting to tackle it.

“Thousands of manufacturing businesses will see their electricity bills cut by 25pc through the British Industrial Competitiveness Scheme. We will be launching a consultation on eligibility for the scheme in the next few weeks.”

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