A recent report from the Confederation of British Industry (CBI) and Energy UK has unveiled alarming trends in the UK manufacturing sector, revealing that nearly 90% of firms have experienced escalating energy bills over the past five years. This surge in costs threatens to undermine the nation’s status as a key manufacturing hub, prompting 40% of businesses to scale back their investment plans. The report serves as a clarion call to government officials, highlighting the urgent need for reform in energy pricing and infrastructure to safeguard the future of the industry.
Energy Prices and Investment Cuts
The findings of the CBI and Energy UK report paint a stark picture of the current economic landscape. Business electricity costs remain approximately 70% higher than they were prior to Russia’s invasion of Ukraine, while gas prices have surged by 60%. This dramatic increase in energy prices is forcing many companies—ranging from chemical producers to hospitality establishments—to reconsider their financial commitments.
According to the report, a staggering 90% of surveyed firms reported rising energy bills, while four out of ten have slashed their investment due to these unsustainable costs. The report warns that without significant reductions in energy expenses, the risks of job losses, production cutbacks, plant closures, and offshoring are likely to escalate.
Calls for Comprehensive Energy Reform
The CBI and Energy UK have urged ministers to collaborate closely with industry stakeholders to undertake a thorough review of the UK’s energy landscape. This initiative aims to explore how the nation’s energy requirements can be met throughout the transition to net-zero emissions. A taskforce comprising researchers from both organisations and industry representatives will examine potential reforms to reduce energy prices and enhance the efficiency of the gas and electricity networks.
The report underscores that the UK currently holds some of the highest industrial energy prices among developed nations, nearly two-thirds above the median costs of countries within the International Energy Agency (IEA) and the most expensive among G7 nations.
Economic Consequences and Trade Deficits
The implications of these rising costs are evident in the UK’s faltering trade performance. Recent figures indicate that the country recorded its largest-ever goods trade deficit, reaching £248.3 billion in 2025—an increase of £30.5 billion from the previous year. While this gap was partially offset by a £192 billion surplus in services, it signals a troubling trend that could further jeopardise the manufacturing sector.
Louise Hellem, chief economist at the CBI, expressed her concerns over the financial strain on industrial sectors, noting closures in the chemicals industry as a direct consequence of soaring energy prices. She described the current year as a “pivotal moment” for the UK’s industrial strategy, emphasising the urgent need for action.
The Need for Competitive Pricing
The report reveals that UK electricity prices for medium-sized businesses are approximately double the EU median, while non-domestic gas prices, though comparable to the EU, remain significantly higher than those in the United States and Canada. This disparity acts as a substantial barrier to economic growth, as businesses are unable to invest in transitioning to cleaner energy despite recognising its long-term benefits.
Energy Minister Ed Miliband has implemented measures aimed at alleviating costs for some of the largest industrial energy consumers, proposing to reduce electricity prices for 7,000 “heavy users” by up to £40 per megawatt-hour. However, Dhara Vyas, head of Energy UK, warns that many businesses outside this protective framework will continue to struggle under the burden of high energy bills.
Vyas highlighted the progress made in reducing domestic energy costs but stressed that the assistance available to industrial users serves merely as a temporary solution, funded by other bill payers. She insisted that lowering prices across the board is essential for the UK’s economic recovery and growth, as the current high energy costs are significantly hindering economic performance.
Why it Matters
The ramifications of escalating energy costs extend far beyond individual businesses; they pose a significant threat to the UK’s industrial landscape and economic stability. As firms grapple with unsustainable expenses, the potential for deindustrialisation looms large, jeopardising jobs and investment in a sector critical to the nation’s growth. The call for comprehensive reform is urgent, as the UK must adapt its energy strategy to foster a competitive environment that encourages investment and innovation, ensuring its place as a leading manufacturing power.
