Key facts
- UK manufacturers are at risk of collapse due to high energy costs, with some relocating production overseas.
- Industrial electricity prices in the UK are over 90% higher than the median of IEA member countries.
- 25% of UK manufacturers have less than 12 months of cash reserves, and 10% face insolvency within a year.
- Energy-intensive industries are disproportionately affected by high electricity prices.
- Government relief measures, including BICS and NCC, are planned to mitigate costs for eligible firms.
Britain's manufacturing sector is facing a severe crisis, with soaring energy costs driving a significant risk of deindustrialization and factory closures. A joint report by Make UK and the Trades Union Congress (TUC) highlights that UK industrial electricity prices are substantially higher than in other developed nations, making energy-intensive industries uncompetitive.
The study reveals that British manufacturers pay an average of 27 pence per kilowatt-hour for electricity, compared to 16 pence in other developed countries. This cost disparity, coupled with systemic carbon levies and high fuel costs exacerbated by geopolitical events, is pushing firms to the brink. A quarter of surveyed manufacturers have fewer than 12 months of cash reserves, and one in ten fears insolvency within the year. Consequently, many are delaying investments, cutting staff, or already moving parts of their production overseas.
Energy-intensive sectors such as chemicals, steel, and glass manufacturing are particularly hard-hit. The UK's heavy reliance on natural gas, limited domestic storage capacity, and a marginal pricing system for electricity, where gas-fired plants often set the benchmark price, contribute to the elevated costs. Furthermore, substantial investments in grid upgrades for renewable energy integration are leading to high non-commodity charges that are passed on to industrial consumers.
In response, the government is introducing measures to mitigate the impact. The planned British Industrial Competitiveness Scheme (BICS), expected in 2027, aims to exempt qualifying energy-intensive industries from specific renewable levies, potentially reducing electricity bills by up to 25%. Additionally, the Network Charging Compensation (NCC) Scheme has increased its discount to 90% to offset high transmission and distribution grid charges. Despite these efforts, the fundamental cost gap remains a challenge for British manufacturers competing globally.