UK Manufacturing Faces Crisis as Energy Costs Soar
LONDON (AP) – The United Kingdom risks a significant decline in its manufacturing sector as persistently high energy prices force businesses to scale back investment and contemplate closures, a new report warns. The findings, released today by the Confederation of British Industry (CBI) and Energy UK, paint a grim picture of an industry struggling under a burden of costs far exceeding pre-Ukraine war levels.
Around 40% of UK firms have already cut back on investment due to the energy crisis, according to the report. Electricity costs remain 70% higher than they were before Russia’s invasion of Ukraine, while gas prices are up 60%. Nearly 90% of companies have seen energy bills rise over the past five years.
“You can see it already in the chemicals industry, which has seen several closures,” said Louise Hellem, the CBI’s chief economist. She described 2026 as a “pivotal moment” for the UK’s industrial strategy.
The report highlights a broader economic impact, pointing to a record £248.3 billion trade deficit in goods for 2025 – a £30.5 billion increase year-over-year. While a surplus in services offered some offset, the widening gap underscores the strain on the UK economy.
UK industrial energy prices are almost two-thirds above the median of International Energy Agency (IEA) countries and are the highest among the G7 nations. Medium-sized businesses face particularly acute challenges, with electricity prices around double the EU median.
The CBI and Energy UK are calling for a comprehensive review of the UK’s energy needs and a modernization of aging gas and electricity networks. They also advocate for a far-reaching review of regulations governing the sale and supply of energy to spur investment and growth.
“Lowering prices for all businesses is fundamental to the UK’s growth story,” said Dhara Vyas, head of Energy UK. A joint taskforce from both organizations and industry groups will explore potential reforms to reduce prices and improve network efficiency.
The government has taken some steps to alleviate the burden, offering price cuts of up to £40 per megawatt hour for 7,000 large energy users. However, critics argue this is merely a “sticking plaster” and is funded by other bill payers, leaving thousands of businesses still struggling.
The report warns that without a reduction in energy bills, the UK faces increased risks of job losses, production cuts, plant closures, and businesses relocating overseas. The findings add to existing calls from manufacturing groups like Make UK for increased government subsidies to prevent further industry decline.
Pour aller plus loin