The UK manufacturing landscape is under significant threat due to soaring energy prices, which have prompted nearly 40% of businesses to curtail their investment plans. A recent report from the Confederation of British Industry (CBI) and Energy UK highlights that the rising costs, exacerbated by the ongoing ramifications of the Ukraine conflict, are jeopardising the country’s status as a key manufacturing hub.
Energy Prices Skyrocket
The report reveals that energy prices for businesses remain alarmingly high, with electricity costs soaring by 70% and gas prices up by 60% compared to pre-war levels. This steep increase has been corroborated by a survey indicating that almost 90% of firms have experienced a rise in energy bills over the past five years. Consequently, the financial strain is forcing many to scale back their investments, leading to fears of potential job losses, reduced production, and even plant closures.
Louise Hellem, chief economist at the CBI, articulated the dire situation, stating that numerous industrial sectors are currently grappling with severe financial difficulties due to exorbitant energy prices. The chemicals industry, in particular, has witnessed several closures, illustrating the substantial impact on manufacturing capabilities.
The Need for Comprehensive Reform
In light of these challenges, the report calls for urgent action from the government. It emphasises the necessity of a thorough review of the UK’s energy regulations and infrastructure to stimulate investment and economic growth. The report advocates for a collaborative approach, urging ministers to partner with industry leaders to reassess the nation’s energy requirements during the transition to net zero.
A proposed taskforce comprising experts from both the CBI and Energy UK aims to explore reforms that could alleviate energy costs and enhance the efficiency of the gas and electricity networks. The report asserts that without substantial changes, the UK could face widespread deindustrialisation, undermining its competitive edge.
UK’s Energy Costs Compared to Global Standards
The report highlights a troubling statistic: the UK’s industrial energy prices are among the highest in the developed world, with rates approximately two-thirds above the median of International Energy Agency (IEA) countries. This places the UK in a precarious position relative to its G7 counterparts, where energy costs are significantly lower, further hampering the country’s economic ambitions.
In 2025, the UK’s trade in goods recorded a staggering £248.3 billion deficit, a figure £30.5 billion larger than the previous year. Although a surplus of £192 billion in services partially offset this deficit, the overall performance raises serious concerns about the UK’s international trade capabilities.
Government Response and Industry Concerns
In response to the energy crisis, Energy Minister Ed Miliband has taken steps to support large energy consumers, proposing a reduction of up to £40 per megawatt hour for 7,000 high-energy users. While this initiative aims to position the UK more competitively, critics argue that it merely serves as a temporary measure. Dhara Vyas, head of Energy UK, expressed worries that many businesses, particularly those outside the government’s support framework, will continue to struggle with high energy bills.
Vyas stressed the importance of lowering prices across the board, asserting that comprehensive reforms are vital for the UK’s economic growth. She acknowledged the progress made in reducing domestic energy costs but emphasised that the current support mechanisms are insufficient and overly reliant on the contributions of other bill payers.
Why it Matters
The findings of the CBI and Energy UK report underscore a critical juncture for the UK’s manufacturing sector. As energy prices remain prohibitively high, the risk of deindustrialisation looms large, threatening not only jobs and economic stability but also the UK’s long-term growth prospects. To safeguard its manufacturing base and ensure a sustainable transition to a low-carbon economy, the UK government must prioritise a comprehensive overhaul of its energy framework. The stakes are high, with the nation’s industrial future hanging in the balance.
