The UK energy prices crisis is putting Britain at risk of losing its position as a major manufacturing hub, after soaring costs forced around 40% of businesses to scale back investment, according to a joint report by the Confederation of British Industry (CBI) and Energy UK.
In a stark warning to ministers, the industry groups said companies ranging from heavy manufacturers to hospitality firms are being squeezed by persistently high electricity and gas costs, coupled with what they described as insufficient reform of the country’s ageing energy infrastructure.
Businesses Sound Alarm Over Rising Costs
The report highlights mounting pressure across the business landscape, with energy bills remaining significantly above pre-Ukraine war levels. According to Energy UK, electricity costs for businesses are still about 70% higher than before Russia’s 2022 invasion of Ukraine, while gas prices remain roughly 60% higher.
Survey findings show nearly 90% of firms have experienced rising energy bills over the past five years. As a direct consequence, four in ten companies have reduced planned investment, raising fears about long-term competitiveness.
Industry leaders warned that unless costs fall, the UK could face increased job losses, production cuts, plant closures and the relocation of operations overseas.
Call for Urgent Energy Market Reform
The CBI and Energy UK are urging the government to work closely with industry on a comprehensive review of the UK’s future energy needs, particularly during the transition to net zero.
The report calls for:
•Reform of outdated energy market regulations
•Upgrades to gas and electricity networks
•Broader measures to reduce business energy bills
A new taskforce involving industry experts and researchers will examine how structural reforms could improve efficiency and bring down costs.
UK Industrial Competitiveness at Risk
Britain currently faces some of the highest industrial energy prices in the developed world. The report notes UK industrial electricity costs are nearly two-thirds above the median across International Energy Agency countries and the highest among G7 economies.
Among medium-sized firms, UK electricity prices are roughly double the EU median. While non-domestic gas prices are closer to European levels, they remain significantly higher than in the United States and Canada.
Economists warn the cost gap is already weighing on trade performance. Figures for 2025 showed the UK recorded a £248.3bn deficit in goods trade — the worst on record — only partly offset by a £192bn surplus in services.
Government Support Seen as Insufficient
Energy minister Ed Miliband has previously announced targeted relief for around 7,000 heavy industrial energy users, including potential electricity price reductions of up to £40 per megawatt hour.
However, industry leaders say the measures do not go far enough. Dhara Vyas, head of Energy UK, warned that thousands of businesses outside the support scheme remain exposed to high costs.
She said lowering prices across the entire business sector is essential to the UK’s economic growth ambitions, adding that current support risks acting only as a temporary fix.
A Pivotal Moment for UK Industry
Louise Hellem, chief economist at the CBI, said energy costs are already causing visible strain in sectors such as chemicals, where several plant closures have occurred.
She described the current period as a decisive moment for Britain’s industrial strategy, warning that failure to act could accelerate deindustrialisation.
The report argues that without deeper structural reform of the energy market and infrastructure, the UK risks undermining both its manufacturing base and its wider net-zero ambitions.