UK Steel has revealed in a new report that Britain’s steelmakers still face significantly higher industrial electricity costs than their European competitors despite government moves to tackle the problem, which undermines competitiveness and investment. New data shows that in 2025/26 UK steel producers will pay up to 25% more for electricity than in France and Germany, resulting in an additional £26m in costs per year.
With the steel industry investing in new electric arc furnaces to further its shift to electrification, competitive electricity prices will be critical to its competitiveness, long-term success, and its long-term survival. Electricity is a fundamental input to steel production. The industry report sets out a clear pathway to close this gap:
- Introduce two-way Contracts for Difference (CfDs) for wholesale electricity, aligning UK industrial power prices with those in France and Germany, as recommended by independent consultancy Baringa.
- Ensure the uplift to 90% compensation for network charges is backdated to April 2025, avoiding another year of excessive costs for UK producers.
Gareth Stace, Director-General at UK Steel, said: “The government has already taken steps to tackle uncompetitive industrial power prices, which have been greatly welcomed by the industry. However, our report shows that Britain’s steelmakers are still paying millions more for electricity than our European competitors.
“The UK steel industry has a hand tied behind its back as it faces electricity prices up to 25% higher than its European competitors, let alone its global counterparts. Uncompetitive power prices pose a threat to jobs, future investment, and our net zero ambitions. Our report shows there is now a straightforward solution with a two-way CfD mechanism and swift backdating of network charge relief, the government can finally eliminate the disparity in industrial electricity prices.
“The prize is enormous. By securing competitive power prices, the UK can build a modern, low-carbon steel industry that underpins growth in clean energy, infrastructure, and manufacturing for decades to come.”
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