The UK’s manufacturing sector faces a growing crisis as persistently high energy prices threaten its global competitiveness, according to a joint report released today by the Confederation of British Industry (CBI) and Energy UK. The report warns that approximately 40% of firms have already been forced to cut back on investment due to soaring costs, raising fears of widespread deindustrialisation.
The findings, published on February 22, 2026, reveal that nearly 90% of companies have experienced rising energy bills over the past five years. Electricity costs remain 70% higher than they were before Russia’s invasion of Ukraine, while gas prices are up 60%, according to Energy UK. This places British businesses at a significant disadvantage compared to international competitors, particularly those in the European Union and North America.
“You can see it already in the chemicals industry, which has seen several closures,” said Louise Hellem, the CBI’s chief economist. She described 2026 as a “pivotal moment” for the UK’s industrial strategy, warning of potential job losses, production cuts, and plant closures if energy bills are not reduced.
The report calls for a comprehensive review of the UK’s energy needs and the regulations governing the sale and supply of energy. It criticises the failure to cap prices and upgrade the country’s ageing gas and electricity networks, arguing that these shortcomings are undermining British businesses across various sectors, from chemical production to hospitality.
UK industrial electricity prices are currently among the highest in the developed world, exceeding the median of International Energy Agency (IEA) countries by two-thirds and surpassing those of other G7 nations. Figures from 2025 show a record £248.3 billion trade deficit for goods, a £30.5 billion increase from the previous year, partially offset by a £192 billion surplus in services.
The government has announced plans to address the issue, including the British Industrial Competitiveness Scheme (BICS), which aims to cut electricity bills by up to 25% for approximately 7,000 manufacturers starting in April 2027. A consultation on the scheme’s eligibility criteria is currently underway. A further £420 million in support is planned through the Supercharger package.
However, Dhara Vyas, head of Energy UK, expressed concern that the current support measures are insufficient and primarily benefit a limited number of large energy users. She argued that the assistance provided is “a sticking plaster” funded by other bill payers and that lowering prices for all businesses is crucial for sustained economic growth. Vyas also highlighted the necessitate for a fundamental review of the energy market and its regulations to improve efficiency.
Energy minister Ed Miliband has previously sought to protect large energy users, but the report suggests that broader action is needed to address the challenges faced by businesses outside the current support schemes. A taskforce comprising researchers from the CBI and Energy UK, alongside industry groups, will examine potential reforms to reduce prices and enhance the efficiency of the UK’s gas and electricity networks.
A government spokesperson stated that ministers are “moving full steam ahead” to implement the industrial strategy and will soon publish a response to the consultation on the British Industrial Competitiveness Scheme.
