LONDON: Soaring energy prices are putting the United Kingdom’s manufacturing base at risk, with nearly 40 percent of businesses cutting investment amid persistently high electricity and gas costs, according to a joint report by the Confederation of British Industry (CBI) and Energy UK.
The report cautions that the UK could lose its status as a major manufacturing hub unless urgent reforms are undertaken to address elevated energy prices and outdated infrastructure. Business electricity costs remain around 70 percent higher than pre-Ukraine war levels, while gas prices are approximately 60 percent higher, Energy UK said.
A survey underpinning the report found that nearly 90 percent of firms have experienced rising energy bills over the past five years, with four in 10 reducing investment as a result. The findings span a wide range of sectors, from heavy industries such as chemicals to hospitality businesses including pubs and restaurants.
The report urges ministers to conduct a comprehensive review of the UK’s energy needs and regulatory framework, particularly as the country transitions to net zero. It calls for reforms to modernize the aging gas and electricity networks and overhaul regulations governing energy sale and supply to spur investment and support economic growth.
Industrial energy prices in the UK are among the highest in the developed world — almost two-thirds above the median of International Energy Agency (IEA) countries and the highest among G7 nations. Among medium-sized businesses, UK electricity prices are roughly double the EU median. While non-domestic gas prices align more closely with the EU average, they remain significantly higher than in the United States and Canada.
The economic impact is already visible. Official figures for 2025 show the UK’s goods trade deficit widened to a record £248.3 billion, £30.5 billion higher than the previous year. Although a £192 billion surplus in services partially offset the gap, industry leaders warn that continued energy cost pressures could accelerate deindustrialization.
Louise Hellem, chief economist at the CBI, described the situation as a “pivotal moment” for the UK’s industrial strategy, noting that sectors such as chemicals have already experienced plant closures due to mounting financial strain.
Energy minister Ed Miliband has introduced measures to shield some of the country’s largest industrial energy users, including plans announced last year to cut electricity prices by up to £40 per megawatt hour for 7,000 heavy users. However, Dhara Vyas, chief executive of Energy UK, warned that thousands of businesses outside the support framework remain vulnerable.
While acknowledging government progress in reducing domestic energy costs, Vyas stressed that broader, structural reforms are essential. “Lowering prices for all businesses is fundamental to the UK’s growth story,” she said, adding that the review aims not only to cut bills but to fundamentally improve the effectiveness of the energy market and its regulatory environment.
The report concludes that without decisive action, the risks of job losses, production cuts, plant closures, and offshoring will intensify, undermining the UK’s long-term economic ambitions.
