British steelmakers are being left at an increasingly severe competitive disadvantage by electricity prices far higher than those faced by international rivals, despite a relatively inexpensive solution being available to Government, a new UK Steel report reveals today.
Key takeaways
- British steelmakers face electricity prices 49% higher than France, 15% higher than Germany, and up to 125% higher than international competitors.
- Uncompetitive power prices will cost UK steel producers an additional £66 million in 2026/27 compared with France alone.
- UK Steel proposes a practical solution costing an estimated £51 million a year (equivalent to just 42p per UK household) with the potential to return money to Government in future years.
The report, Competitive electricity prices: a prerequisite for reindustrialisation, finds that British steel producers are expected to pay £91/MWh for electricity in 2026/27, compared with just £61/MWh in France and £79/MWh in Germany. The disparity with France has widened despite recent Government interventions, as high wholesale electricity costs continue to undermine British industry’s competitiveness. The picture is even more stark internationally. UK steelmakers face electricity prices 125% higher than producers in Alberta, Canada, 68% higher than Vietnam and 71% higher than Turkey.
The gap with France alone will cost British steelmakers an additional £66 million in 2026/27, bringing the cumulative additional cost since 2017/18 to an estimated £917 million – money that could otherwise have supported investment, jobs, and the modernisation of British steelmaking. Yet UK Steel argues that the Government has an affordable and readily implementable opportunity to address this longstanding problem.
Independent modelling by energy consultancy Baringa identifies a wholesale electricity price rebalancing mechanism that would align British industrial electricity prices with those faced by European competitors. The mechanism would compensate energy-intensive industries when British wholesale prices are higher, but require payments back when British prices fall below the European benchmark. The proposed scheme would cost an estimated £51 million annually between 2026 and 2030, equivalent to approximately 42p per UK household per year. Crucially, it is forecast to generate a net financial return averaging £13 million annually between 2031 and 2035, rather than becoming a permanent one-way subsidy.
The approach could be introduced within the existing regulatory framework, providing a practical means of improving competitiveness while longer-term electricity market reforms take effect.
British steelmakers are being asked to compete with one hand tied behind their backs. Despite welcome Government action, our electricity prices remain vastly higher than those of our European and global competitors, and the gap with France is getting worse.
Peter Brennan, Director General of UK Steel
He continued: “Fixing this problem need not be difficult or expensive. For the equivalent of just 42p per household a year, the Government could level the playing field for a strategically vital industry, unlocking investment, supporting thousands of skilled jobs, and giving British steelmakers a fighting chance against international competition.
“Our proposal is a two-way mechanism that protects industry when British prices are uncompetitive and returns money when they fall below European levels. It is a practical, affordable solution that could be delivered quickly.
The Government has rightly made reindustrialisation a national priority. But we cannot rebuild British manufacturing while forcing our steelmakers to pay substantially more for electricity than their competitors.”
With British steelmaking increasingly reliant on electricity as the industry transitions towards lower-carbon production, closing the gap is essential to securing investment and achieving the Government’s ambition for UK producers to supply 50% of domestic steel demand. The report also calls for reforms to network charge compensation to ease industry cashflow pressures and for electricity cost relief to be extended to more businesses across the steel supply chain.
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