High Energy Prices Put UK Manufacturing at Risk, Business Groups Warn
High energy prices are putting the UK’s position as a strong manufacturing country at risk, leading business groups have warned.
A new report from the Confederation of British Industry (CBI) and Energy UK says that about 40% of businesses have reduced their investment because electricity and gas costs remain much higher than before Russia’s invasion of Ukraine.
The report warns that the UK could lose its status as a major manufacturing centre if the government does not take stronger action. It says high energy prices are hurting many types of businesses, from chemical factories to pubs and restaurants.
According to Energy UK, business electricity prices are still around 70% higher than they were before the war in Ukraine began. Gas prices are also about 60% higher than before the conflict. These higher costs have lasted for several years, putting pressure on companies across the country.
A survey included in the report found that nearly 90% of companies have seen their energy bills increase over the past five years. As a result, four out of ten businesses have cut back on investment. This means they are spending less money on expanding their operations, buying new equipment, or hiring more workers.
The report warns that if energy prices do not fall, the situation could get worse. Companies may be forced to reduce production, close factories, move operations abroad, or cut jobs. This would damage the UK economy and weaken its industrial base.
The CBI and Energy UK are calling on the government to work more closely with industry leaders. They want a full review of the UK’s energy system to make sure it can meet the country’s needs while also moving toward its net zero climate goals.
They say the UK’s gas and electricity networks are old and need upgrading. They also believe that rules controlling how energy is sold and supplied are outdated and should be modernised. In their view, changes to these regulations could help lower costs and encourage more investment.
A joint taskforce made up of researchers, industry representatives and business groups will study how reforms could make energy networks more efficient and bring down prices. The aim is to show the government that current reforms have not gone far enough and that stronger action is needed to prevent the decline of UK industry.
The report highlights that the UK has some of the highest industrial energy prices in the developed world. Prices are almost two-thirds higher than the average in countries that are members of the International Energy Agency (IEA). Among the G7 group of major economies, the UK has the highest industrial electricity prices.
These high costs are already affecting the country’s trade performance. Official figures for 2025 show that the UK’s trade in goods had its worst year on record. Britain reported a goods trade deficit of £248.3 billion, which was £30.5 billion more than the previous year.
Data from the Office for National Statistics showed that although the UK had a £192 billion surplus in services, it was not enough to fully offset the large gap in goods trade.
Manufacturers have been warning about the problem for some time. Last year, the industry group Make UK called on the government to provide millions of pounds in extra subsidies to prevent further decline in manufacturing.
Louise Hellem, chief economist at the CBI, said many industrial sectors are already feeling serious financial pressure. She pointed to the chemicals industry, where several plants have already closed because of rising costs. She described this year as a key moment for the UK’s industrial strategy.
Among medium-sized businesses, UK electricity prices are about twice the average price in the European Union. While UK gas prices for businesses are similar to those in the EU, they are much higher than in countries such as the United States and Canada. This makes it harder for UK companies to compete internationally.
The report also says high energy costs make it more difficult for businesses to invest in clean energy. Although many companies understand the long-term benefits of switching to greener technologies, they cannot afford the upfront costs while energy bills remain so high.
Energy Secretary Ed Miliband has introduced measures to support the country’s biggest industrial energy users. The government announced plans to cut electricity prices by up to £40 per megawatt hour for around 7,000 heavy energy users. The goal is to bring UK energy costs closer to those in other major economies.
However, Dhara Vyas, chief executive of Energy UK, said she is worried that many smaller and medium-sized businesses will not benefit from this support. She said that while the government has made progress in reducing energy bills for households, support for industry is limited and partly funded by other bill payers.
Vyas said lowering energy prices for all businesses is essential for economic growth. She added that the current support measures are not enough and that a deeper reform of the energy market is needed to make it more effective and affordable.
A government spokesperson said ministers understand that energy costs are one of the biggest challenges facing industry. They said the government is moving quickly to implement its industrial strategy and will soon publish details of the British Industrial Competitiveness Scheme, which could reduce electricity bills by up to 25% for more than 7,000 businesses.
Business groups say the coming months will be critical. Without stronger action to bring down energy costs, they warn that the UK risks losing factories, jobs and investment at a time when economic growth is already under pressure.
Published: 23th February 2026
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