Energy Price Crisis: UK Manufacturing Facing “Deindustrialisation” Threat

  Posted by: electime      23rd February 2026

A new report from the CBI and Energy UK has warned that the UK’s status as a global manufacturing powerhouse is at breaking point, with rocketing energy costs forcing 40% of firms to slash investment.

The joint report, released on 22nd February 2026, paints a grim picture of the industrial landscape. Despite government efforts to subsidise “heavy users,” the broader manufacturing sector is struggling with electricity prices that remain 70% higher than pre-2022 levels. For many, the situation has become a “ticking timebomb” that threatens to trigger widespread plant closures and offshoring.

A Brake on the Net Zero Transition

One of the most concerning findings for the electrical and renewables sectors is the impact on green investment. The report highlights that while businesses are eager to switch to clean energy and improve electrical efficiency, the sheer weight of current bills has stripped away the capital needed for these projects.

“High energy costs act as a brake on ambitions for economic growth,” the report states. “Businesses cannot invest in switching to clean energy—even though they know the long-term benefits of doing so.”

Infrastructure and Regulatory Failures

The CBI and Energy UK have called for a “comprehensive review” of outmoded regulations and a massive upgrade to the UK’s ageing electricity networks. The report argues that British businesses are being undermined not just by global market volatility, but by a failure to modernise the national grid and energy supply regulations.

UK industrial electricity prices are now nearly two-thirds above the median of International Energy Agency (IEA) countries, making Britain the most expensive place for industrial energy in the G7.

Response

In response, the government pointed to its British Industrial Competitiveness Scheme, which aims to reduce electricity bills by up to 25% for approximately 7,000 “heavy users.”

However, Dhara Vyas, head of Energy UK, warned that thousands of businesses outside this specific “ringfence” are being left behind. She described current support as a “sticking plaster” and urged ministers to look at fundamental market reforms rather than temporary subsidies.

For the electrical contracting and engineering sectors, the message is clear: without significant regulatory reform and investment in network efficiency, the very industries that drive demand for high-end electrical infrastructure may soon be forced to pull the plug on UK operations.

David Hall

Ahead of the government soon publishing the response to its consultation on eligibility for the British Industrial Competitiveness Scheme, David Hall, President, Schneider Electric UK&I, offered his own response: “High energy costs are placing a stranglehold on UK industry, such as manufacturing and data centres, hindering its ability to invest in electrification and digital technologies that are essential for modern, competitive production. Lowering the cost of power must be a priority if businesses are to switch from fossil fuels, adopt automation, and scale digital solutions that improve efficiency and productivity. Whilst we welcome the Government’s commitment to lower energy bills for manufacturers through schemes like BICS, industry needs a long-term plan and solutions – not short-term fixes.

“Progress to electrification is also being held back by an ageing grid infrastructure that is no longer fit for purpose. Carefully managed grid upgrades will bolster resilience, secure energy independence and bring down the cost of electricity to more affordable levels.

“Finally, alongside electrification, digitalisation is key to boosting competitiveness and innovation. Adopting readily available digital tools to improve efficiency and reduce costs is key – especially at a time where energy costs are at an all-time high. After all, the cheapest energy is the energy you don’t use. By embracing electrification, automation, and digitalisation, the UK can revitalise its industry, create jobs, and drive sustainable economic growth.”