Persistently high energy prices are undermining UK manufacturing competitiveness and delaying investment decisions, according to a joint report from the Confederation of British Industry (CBI) and Energy UK.
Investment plans put on hold
The report, Cutting Business Energy Costs: The case for action, warns that rising energy bills are forcing firms to rethink expansion plans, with CBI survey data showing almost 90% of businesses had seen energy costs increase over the past three years and four in ten planned to cut back investment as a result.
Higher electricity and gas prices are squeezing margins across the economy, leaving manufacturers with fewer resources to invest in new equipment, low-carbon upgrades or capacity growth.
UK costs among highest in developed world
UK companies face some of the highest electricity costs in the developed world, with industrial prices nearly two-thirds above the median of International Energy Agency countries and the highest in the G7, according to the report’s analysis.
For medium-sized firms, electricity prices are around double the EU median, creating a significant disadvantage against overseas competitors and increasing the risk of production moving abroad.
Even sectors receiving support, such as steel, can still pay 14-25% more for electricity than counterparts in France and Germany, the report notes.
Impact on jobs and supply chains
High energy costs are already contributing to factory closures and mothballing in energy-intensive sectors, including chemicals, while some firms are cutting headcount or working hours to manage rising bills.
The report adds that weak profitability makes it harder for multinational firms to justify locating new production lines in the UK, particularly when rival markets offer cheaper energy.
Call for national strategy
CBI and Energy UK are urging government to develop a cross-departmental strategy to lower business energy costs, arguing that affordable power is essential for investment, productivity and long-term economic growth.
Without reform, the report warns, rising network charges and policy costs could further increase energy bills, risking lost investment and weaker industrial competitiveness.
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