Labour is advancing its ambitious plan to establish a state-owned energy company, Great British Energy, supported by £8.3bn of taxpayer funds. This move represents one of the most significant market interventions in decades.
In the King’s Speech, Sir Keir Starmer’s Government confirmed that Great British Energy will develop, own, and operate energy projects such as wind farms, utilising public funds to attract additional private sector investment.
Simultaneously, Labour introduced a series of comprehensive railway reforms and upgrades, including critical elements of the Manchester-Liverpool route, as advocated by Andy Burnham, the Mayor of Greater Manchester.
On Wednesday, the Government stated that GB Energy would “help us take back control of the country’s energy, achieve energy independence, create new jobs, save money for households, and tackle climate change”.
The agency’s £8.3bn budget, spanning this parliament, will be used to acquire equity stakes in energy projects and their supply chains, encompassing supply, distribution, storage, emissions capture, and measures to accelerate the green transition.
This marks the first time since the late 1980s, when the electricity industry and British Gas were privatised, that the Government will directly participate in the energy market.
Headquartered in Scotland, GB Energy will be established through the Great British Energy Bill announced in the King’s Speech. This bill will also empower Ed Miliband, the Energy Secretary, to “provide Great British Energy with the financial backing needed to meet its aims and ambitions”, while also requiring the publication of a “strategic priorities” statement for the agency.
Net zero electricity system by 2030
The new Government’s priorities for GB Energy are yet to be fully detailed, although Labour has set an overarching goal of achieving a “net zero” electricity system by 2030.
The energy industry remains divided on how to best utilise GB Energy’s funds. Some Labour supporters advocate for extensive backing of renewable power projects nationwide, while many experts suggest targeting the budget towards emerging technologies like carbon capture and hydrogen production, which require cost reductions.
Documents accompanying the King’s Speech indicate that achieving a net zero power grid will necessitate “doubling of onshore wind capacity” and a “three to fourfold increase in current offshore wind and solar capacity”.
The documents add that the private sector alone is unlikely to deliver the required scale and pace of investment within the current framework, highlighting the public sector’s unique capabilities to mitigate market failures, thereby accelerating and reducing the cost of deploying renewable generation capacity.
GB Energy will collaborate with the National Wealth Fund, which also has £7.3bn allocated for green technologies and infrastructure projects, such as ports to support domestic production of wind turbines.
Vicky Parker, head of power and utilities at PwC UK, noted: “The policy direction of the new Government suggests we are likely to see growing public sector involvement to help drive progress in energy.”
Jonathan Croley, a partner and energy specialist at law firm Ashfords, commented that many private firms remain “muted” on GB Energy, adding: “At best it could offer a useful partner for risky schemes. At worst it could be unnecessary competition.”
Rail reforms and nationalisation plans
The Government also announced significant investments to enhance rail links in northern England, amid pressure from Andy Burnham and other regional Labour leaders. This includes new stations at Manchester Piccadilly and Manchester Airport, part of a programme to improve east-west connectivity following the cancellation of the High Speed 2 line beyond Birmingham.
Despite Labour’s decision not to reverse the cancellation of HS2’s second phase, the retained HS2 bill includes constructing new railway lines from Warrington to Manchester and from Manchester to Marsden in West Yorkshire.
Labour also confirmed plans to bring train operators under state control as their contracts expire, making nationalisation the “default position rather than merely a last resort.” Legislation will be swiftly enacted to ensure public ownership of the first contracts, potentially targeting those most prone to delays and cancellations.
However, immediate widespread nationalisation of underperforming routes is unlikely, suggesting a phased approach instead. This strategy would provide time for operators like Avanti, which runs trains on the West Coast Main Line, to improve performance before potentially being renationalised in 2026.
Labour will establish Great British Railways (GBR) to integrate nationalised train operators with Network Rail’s track maintenance functions. Initially, a “shadow GBR” will be created to promote collaboration and foster a “new approach to industrial relations.”
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Labour to launch state-owned Great British Energy with £8.3bn market intervention