Persistently high energy prices are putting serious pressure on Britain’s manufacturing sector, creating what industry leaders warn could become a lasting threat to the country’s industrial competitiveness.
A new joint report by the Confederation of British Industry (CBI) and Energy UK says sky-high energy costs are not only eating into company profits but also discouraging businesses from making critical investments.
Nearly 90% of manufacturers have faced rising energy bills over the past three years, according to CBI data. Even more concerning, about four in ten firms now plan to reduce or delay investment in new equipment, factory expansion, or clean technologies because of these costs. Analysts warn that such pullbacks could trap the industry in a cycle of underinvestment and falling productivity.
Energy prices in the UK are among the highest in the world. Industrial electricity costs are roughly two-thirds above the average across countries in the International Energy Agency, and the highest among the G7 nations.
Medium-sized manufacturers have been hit especially hard, facing electricity rates nearly double those paid by their counterparts in the European Union. Even industries benefiting from government relief, such as steel, still pay around 14% to 25% more than competitors in France or Germany.
The situation has already led some energy-intensive sectors, including chemicals, to scale back production or close facilities. Others are cutting staff hours or reducing jobs to stay afloat, impacting local economies and supply chains nationwide.
Global events have made matters worse. The recent conflict in the Middle East pushed energy markets into turmoil, driving up costs further and exposing the fragility of UK supply chains. For international manufacturers deciding where to build or expand operations, these high and unpredictable energy bills make the UK a less attractive option compared with cheaper markets abroad.
The CBI and Energy UK are calling for urgent government action through a coordinated national strategy. They argue that affordable and reliable energy is essential not just for manufacturers but for the entire economy.
Possible reforms include revisiting how policy and network costs are distributed, and finding new ways to ease the energy burden on industry while continuing the transition to cleaner energy sources.
According to the report, the challenge is now structural rather than temporary. Without bold action, Britain risks losing investment, weakening its supply chains, and slowly sliding down the global manufacturing ranks.
The message from business leaders is clear: the window for change is closing, and decisive steps are needed before the damage becomes permanent.