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The United Kingdom risks losing its position as a leading manufacturing hub due to soaring energy prices that are forcing businesses to scale back investment, according to a joint report by the Confederation of British Industry (CBI) and Energy UK.
The report delivers a sharp warning to government ministers, arguing that British companies — ranging from chemical manufacturers to hospitality businesses — are being weakened by persistently high energy bills and outdated infrastructure. Industry leaders say the government has failed to adequately cap prices or modernise the country’s ageing gas and electricity networks.
Investment Under Pressure
Energy UK, which represents more than 100 electricity generators and suppliers, revealed that electricity costs for businesses remain 70% higher than before Russia’s invasion of Ukraine, while gas prices are still 60% above pre-war levels.
A survey conducted for the report found that nearly 90% of businesses have experienced rising energy bills over the past five years. Alarmingly, four in ten companies have already reduced investment because of these increased costs.
The report warns that unless energy bills are brought down, the UK could see rising job losses, production cutbacks, factory closures, and an acceleration of companies moving operations overseas.
Call for Major Energy Reform
The CBI and Energy UK are urging ministers to work closely with industry leaders to conduct a comprehensive review of the UK’s energy system. This includes examining how the country can meet its energy demands while transitioning toward its net-zero emissions targets.
A newly formed taskforce — made up of researchers and industry representatives — will explore reforms aimed at cutting costs and improving the efficiency of gas and electricity networks.
The organisations argue that existing reforms have not gone far enough and warn that the UK faces the risk of widespread deindustrialisation if urgent action is not taken.
UK Among Most Expensive in Developed World
The UK currently has some of the highest industrial energy prices among developed economies. Costs are nearly two-thirds above the median for countries within the International Energy Agency (IEA) and are the highest among G7 nations.
Recent trade figures underline the strain on the economy. In 2025, Britain recorded its worst-ever performance in goods trade, posting a £248.3 billion deficit — £30.5 billion more than the previous year. While the services sector generated a £192 billion surplus, it was not enough to offset the widening goods deficit.
Industry Voices Growing Concern
Louise Hellem, chief economist at the CBI, said certain industrial sectors are already experiencing severe financial pressure.
“We are already seeing the impact in the chemicals industry, where several closures have occurred,” she said, describing this year as a “pivotal moment” for the country’s industrial strategy.
Medium-sized businesses are particularly vulnerable, with electricity prices reportedly double the EU median. Although non-domestic gas prices are similar to those in the EU, they remain significantly higher than in countries such as the United States and Canada.
The report argues that high costs are slowing economic growth and preventing companies from investing in clean energy solutions — despite recognising the long-term benefits.
Government Support Under Scrutiny
Energy Minister Ed Miliband previously announced plans to cut electricity costs by up to £40 per megawatt hour for around 7,000 heavy energy users, aiming to bring the UK more in line with international competitors.
However, Dhara Vyas, chief executive of Energy UK, warned that thousands of businesses outside this support scheme remain exposed to high energy bills. She said the current assistance measures act only as a temporary fix and are being funded by other bill payers.
While acknowledging government efforts to reduce domestic energy costs, Vyas stressed that broader support for all businesses is essential.
“Lowering prices for all businesses is fundamental to the UK’s growth story,” she said, adding that the current system requires a deeper overhaul to ensure it works more effectively.
