Britain’s Foundational Industries Under Strain As 2026 Pushes Energy Costs And Policy Debates

Friday, January 9, 2026 — A year of upheaval is shaping Britain’s industrial core. Energy-intensive sectors, from steel to chemicals, are operating at roughly half of 2000 levels, with employment collapsing from well over 800,000 to just over 413,000 since the early 2000s. the trend has accelerated in the last year, with high-profile plant closures and refinery reductions highlighting the fragility of the country’s foundational industrial base.

Across the country, factories that fueled regional growth are closing or shrinking. In 2023 the sector shed jobs again, and recent years have seen the exit or nationalisation of several key facilities. The number of operational oil refineries has fallen to four from six,while major ethylene crackers have shut down,and ammonia production has ceased since the COVID era. Cement output is now only 72% of its 2007 level, and imports have surged, intensifying inflationary pressures in housing and other downstream sectors.

The global context helps explain the squeeze. Growth in East Asia has driven down global input prices, squeezing margins for advanced economies like Britain. Western governments have largely shielded domestic producers with protective measures, but Britain has been slower to respond, allowing energy- and policy-driven costs to push factory closures and job losses to the fore.

What’s driving the decline

Two forces dominate the current crisis. First, energy costs for industry have surged, partly driven by climate policies that raise bills through green levies and subsidies for backup power. While electricity generation has decarbonised rapidly, total emissions tied to imports have not fallen as quickly, leaving energy-intensive producers exposed to volatile wholesale prices.

second, policy design around the Net zero agenda and the Emissions Trading scheme is shaping cost structures and competitiveness. The combination of carbon pricing and related levies has made industrial heat a strategic challenge for steel, glass, plastics and cement manufacturers, even as the global supply chain remains dependent on these materials for modern production.

What can be done to revive the foundational industrial economy

Analysts argue for a bold reorientation of energy, tax, and trade policies to protect and rebuild Britain’s foundational industries. key proposals include removing Net Zero-related levies from energy bills, reducing wholesale costs by reforming carbon pricing mechanisms, and redirecting subsidies away from speculative technologies toward essential industrial needs.

Other measures call for easing fiscal pressure on oil and gas production, expanding access to domestic energy, and lifting restrictions on new field licenses. While these steps won’t eliminate import reliance, they could safeguard tens of thousands of high-value jobs, strengthen energy security, and help reduce the current-account deficit.

The Foundational Industrial Economy (FIE) at a glance

Experts describe the FIE as the backbone of regional economies and modern supply chains. In 2023, the FIE employed about 445,000 people — roughly 1.4% of total employment — and generated around £57 billion in gross value added (GVA), about 2.5% of the national total. on average, an FIE job delivers substantially higher value added than the average worker, underscoring its role in regional productivity. Outside London, the sector accounts for about 1.7% of jobs but roughly 3% of GVA.

Context and credibility

Analysts emphasize that rebuilding Britain’s industrial strength requires a long-term, stable framework. Energy costs, price competitiveness, and strategic investment in foundational sectors shape the outlook for regional growth. For background on how pricing and policy interact with industry leverage,see analyses from international energy bodies and government policy notes on emissions trading and energy subsidies.

For broader policy context, authorities point to reform options including revising support for low-emission incentives, rebalancing carbon-cost assignments, and ensuring domestic energy security through a mix of fuels and technologies. International energy agencies highlight the importance of stable, technology-agnostic industrial policy to sustain competitiveness while advancing climate goals.

What this means for readers

The health of Britain’s foundational industries affects jobs, regional prosperity, and the resilience of supply chains that power everyday life. The choices governments make now will influence factory closures, investment, and the ability of regional towns to attract new, high-skilled employment in the years ahead.

Key references and where to learn more

For more on emissions pricing and energy policy debates, see official government pages on the Emissions Trading Scheme and energy subsidies, as well as reports by international energy agencies. These sources provide technical background and policy options that mirror ongoing discussions about industrial revival and energy security.

External sources:
UK Emissions Trading Scheme,
International energy Agency,
Net Zero Strategy (UK Government).

Two questions to readers

What is the single policy change you believe would most effectively shield Britain’s foundational industries while meeting climate goals?

How can regional towns attract investment and high-skilled jobs without compromising energy security and affordability?

Disclaimer: This article provides context and analysis for informational purposes only. It is not financial or legal advice.

Share your thoughts below and join the discussion as Britain weighs the roadmap to a stronger, more resilient industrial base.