High industrial energy costs could force factory closures and reduce UK manufacturing output unless ministers accelerate reforms to lower electricity prices, according to a report from Make UK and renewable energy supplier Ecotricity.
The report warns that 90 per cent of manufacturers have seen their energy bills rise since 2022, with more than half identifying energy costs as their biggest business challenge over the coming years. Around 13 per cent said further increases could threaten the viability of their operations.
Make UK estimates that a 13 per cent fall in manufacturing activity would reduce economic output by around £85bn a year, including an estimated £50bn across supply chains.
The report argues that persistently high electricity prices are eroding competitiveness, squeezing profit margins and delaying investment. Seven in 10 manufacturers said they had passed higher energy costs on to customers.
The industry body attributes the UK’s comparatively high industrial electricity prices to several structural factors, including wholesale electricity prices remaining closely linked to gas markets, policy costs added to electricity bills, delays to grid connections and inefficiencies in post-Brexit energy trading arrangements.
Despite these pressures, manufacturers continue to support the transition to lower-carbon energy. Nearly three-quarters of businesses surveyed said a renewable-led electricity system offered the best route to lower energy costs, while 71 per cent said achieving net zero remained important to their operations.
The report found that almost nine in 10 manufacturers had already introduced, or were implementing, energy efficiency measures, while 63 per cent had begun electrifying parts of their operations. More than four in five said they would increase investment if the cost gap between electricity and gas narrowed.
Make UK is calling for a series of policy changes, including bringing forward the British Industrial Competitiveness Scheme, moving electricity policy levies into general taxation, expanding support for green investment and accelerating reforms to the electricity market and grid infrastructure.
Stephen Phipson, chief executive of Make UK, said manufacturers wanted an energy system that enabled them to compete internationally rather than ongoing financial support. He argued that reducing industrial electricity costs would encourage investment, improve competitiveness and help businesses continue to decarbonise while expanding production in the UK.
