Industry and Exports (Financial Assistance) Bill

Lord Sharpe of Epsom Excerpts

2nd reading & 3rd reading & Order of Commitment discharged
Thursday 12th March 2026 Lords Chamber

[Lord Sharpe of Epsom (Con)]

My Lords, it is pleasure to follow the Minister, and I look forward to sharing some wisdom and expertise—at least I hope so.

I am grateful to the Minister for his introduction and for the opportunity to respond on behalf of these Benches. I say at the outset that we do not oppose the Bill. Updating financial limits that have sat unchanged for decades is both sensible and necessary as a piece of housekeeping. We recognise the importance of ensuring that the Government retain the tools to support British industry and exporters, where that support is genuinely warranted—the Minister gave some very good examples of that.

However, I will use this occasion to raise some broader concerns—not about the Bill in isolation but about what it may mean for the direction of the Government’s industrial policy more widely. The question we must ask is not merely whether the Government can provide financial assistance to industry but whether the cumulative effect of doing so—repeatedly, expansively and as a matter of instinct—risks becoming a substitute for the structural reforms that our economy needs.

Subsidisation has a seductive logic; it is visible and feels like action, and the Minister just called it transformational. However, we on these Benches believe that when the state steps in to cushion risk, it does not eliminate that risk; it merely transfers it to the taxpayer, while simultaneously distorting the market signals on which businesses depend to allocate capital efficiently. The Government should recognise that the misallocation of resources that follows is not always immediately apparent, but its effects compound over time.

The most powerful industrial policy this Government could pursue is one measured not in billions of pounds of guarantees and grants but in the burdens lifted from the shoulders of British businesses. We urge the Government to focus their energies there. Energy costs—in particular, the weight of environmental levies on businesses’ electricity bills—remain a serious competitive disadvantage for British industry. Unnecessary reporting requirements consume the time and attention of managers who ought to be focused on growth. I must mention the Employment Rights Act, which the Government’s own figures suggest will impose over £1 billion in administrative costs on business—a figure that, as businesses have warned, is widely regarded as a considerable underestimate. These are the frictions that erode competitiveness quietly and relentlessly, and no amount of export finance can compensate for them. Also, as we discussed in a Question earlier this week, they impact the quantity of foreign direct investment.

I will make a more fundamental point about risk. There is a tendency in industrial policy debates to treat risk as an enemy to be neutralised, yet risk is not merely a problem but a productive signal. It is the prospect of return that draws private capital towards genuinely promising ventures. When the state steps in to underwrite commercial risk too broadly or too readily, it does not simply help good projects that the market overlooked but sustains projects that the market had rationally declined to back. We should be cautious about inadvertently engineering away the discipline that risk imposes, because that discipline is part of what makes markets work. I appreciate that this was all debated in another place, but will the Minister explain the balance that he expects to see between private capital and UK Export Finance funding and how he expects this to work in practice?

That said, we are not dogmatic. We recognise that there are strategic sectors of the economy—the Minister highlighted some—where there is a case for targeted support, and that in some cases government has an instrumental role to play in getting exports over the line. We recognise that we live in a world of intensifying geopolitical competition. The rise of China as an industrial and technological power, the fragility of supply chains that was exposed so brutally during the pandemic, and the imperative of maintaining domestic capability in defence and critical technologies create a legitimate case for a limited role for government. We do not dispute that. What we dispute is the notion that broad, expansive subsidisation should always be the appropriate or default instrument and that it can substitute for the competitive fundamentals that underpin long-term industrial strength. A strong domestic industrial base is built on competitive energy, minimal regulations, a tax system that rewards investment and a labour market that gives businesses the flexibility to grow. Financial assistance of the kind that this Bill enables should sit atop those foundations and should not be deployed in their absence.

This Bill had its Second Reading in another place on 23 February. During a debate on my honourable friend Dame Harriett Baldwin’s eminently sensible and reasonable amendment relating to reporting requirements for UK Export Finance in relation to the steel industry, the Minister there argued that it was unnecessary because the steel strategy would be published in due course—I am sure the Minister knows what is coming. The steel strategy was originally promised last year. Without reopening the entire debate, but with costs mounting daily at British Steel—up to £370 million already according to a recent letter from the Minister’s colleague, the noble Baroness, Lady Lloyd, which I think is almost certainly a dramatic understatement, by the way—I ask the Minister to be more specific. When will we see the steel strategy?

It is worth heeding the very wise words of President Reagan, who once said that the nine most terrifying words in the English language are, “I’m from the Government and I’m here to help”. We will continue to press the Government on whether their industrial strategy is truly oriented towards building competitive strength or risks drifting towards a model of managed dependency where the taxpayer bears the risk, the market loses its discipline and British businesses are, in the longer run, no stronger for it.