Energy costs threaten UK manufacturing base

UK manufacturers are warning that high electricity costs are pushing production overseas and increasing the risk of deeper industrial decline, despite government efforts to strengthen competitiveness.

Make UK and the Trades Union Congress have called for broader support on industrial energy bills after survey findings suggested that many manufacturers have either moved production abroad or are considering doing so. The warning comes as ministers look to use industrial strategy, clean energy investment, and advanced manufacturing as foundations for long-term growth.

The concern centres on the gap between UK industrial electricity prices and those faced by competitors in Europe and the United States. Manufacturers argue that the difference is weakening margins, shaping investment decisions, and making some domestic production less viable.

Make UK has called for the British Industrial Competitiveness Scheme to be expanded more widely across the sector, rather than focusing relief on a narrower group of energy-intensive industries. Although the most power-hungry operations are most exposed, the problem extends beyond heavy industrial users.

Companies operating machinery, refrigeration, fabrication, processing, precision engineering, chemicals, ceramics, metals, and other energy-dependent processes face sustained cost pressure. Even where energy is not the largest operating cost, a persistent price disadvantage can influence decisions on automation, site expansion, product lines, reshoring, and long-term contracts.

The government has already announced support measures for energy-intensive sectors, including exemptions from certain policy costs. Manufacturers argue that the benefits have not reached enough companies quickly enough, particularly as geopolitical instability continues to affect global energy markets. Electricity prices that were once treated as a short-term shock have become a recurring test of competitiveness.

Manufacturing sits at the centre of several national priorities: productivity, exports, defence resilience, clean technology, regional employment, and supply chain security. Those objectives become harder to deliver when companies conclude that the UK is a high-cost production location compared with rival economies offering cheaper power, deeper relief, or more predictable industrial policy.

Mid-sized manufacturers are especially exposed. Large multinationals can compare sites across jurisdictions and move activity where the business case supports it. Smaller suppliers may not have the same flexibility, leaving them more vulnerable to squeezed margins, delayed investment, and weaker workforce plans. When a major manufacturer shifts production, the effect reaches logistics providers, maintenance specialists, component suppliers, and local service companies.

The warning lands at a difficult point for industrial policy. Ministers want to attract investment into batteries, clean energy equipment, advanced materials, defence manufacturing, and life sciences. Each of those sectors depends on a strong domestic manufacturing base, skilled workers, supplier depth, and confidence in operating costs. Energy prices that erode existing capability may also make it harder to build new capability.

There is also a direct connection between decarbonisation and competitiveness. Electrification is central to cutting industrial emissions, but companies are less likely to invest in electric processes if electricity remains expensive relative to gas or overseas production. Clean power targets, grid reform, and market design therefore have to translate into commercially usable energy prices, not only higher renewable generation capacity.

The wider economic risk is that manufacturing capacity, once lost, is expensive and slow to rebuild. Production sites carry skills, apprenticeships, engineering knowledge, supplier networks, and local spending. A company may keep headquarters, sales, or design functions in Britain after moving production, but the country loses operational expertise and the depth of industrial ecosystems.

The immediate policy question is whether existing support can move quickly enough to prevent more decisions being made against UK production. Manufacturers do not only need relief on current bills. They need confidence that future energy costs will support investment in sites, equipment, skills, and low-carbon processes. Without that, industrial strategy will continue to collide with the arithmetic of electricity bills.