A new industry survey has revealed that Britain's industrial sector is at risk of collapse, with thousands of companies warning they could face bankruptcy within the next year due to high energy prices.
Survey Findings
The manufacturers' body Make UK stated that the latest feedback from its members indicates many cannot cope much longer with energy costs that are twice the average in continental Europe and four times higher than in the US.
The survey found that a quarter of manufacturing companies either plan to move their production overseas or have already done so, while one in ten believe it is likely or very likely they will become insolvent within the next 12 months.
Industry Leaders Speak Out
Stephen Phipson, chief executive of Make UK, said that although factory output remained robust over the previous quarter, businesses are gloomy about the outlook, largely due to the Iran war and rising oil and gas prices. Confidence has dropped to a four-year low.
"The time for talking is over. The time for action is now," he said. "Britain faces deindustrialisation unless manufacturers get relief from high energy prices. Electricity and gas in the UK are far too expensive and it's costing our country steeply. We cannot afford to be delayed by political upheaval, or by further consultations."
Impact on Businesses
Almost half (46%) of industrial companies have seen a further increase in their energy bills since the start of the conflict in the Middle East, with six in ten passing this rise on to customers. However, despite raising prices, almost all companies (98%) told Make UK they expect a significant squeeze on their profitability over the next quarter.
In response to falling profit margins, almost four in ten (38%) companies have delayed investment, and more than a fifth (21%) have reduced their headcount.
Call for Government Action
Make UK is calling on the Treasury to cover the cost of taxes and levies paid by industrial businesses, using funds from general taxation as in France and Germany, so Britain's industrial base can begin to recover. About 50% of the bills paid by industrial businesses – amounting to £3bn – are made up of government carbon taxes and levies used to cover the extra costs of upgrading the national electricity grid.
In April, the government extended a subsidy scheme that reduces bills by up to 25% for 10,000 companies that qualify as heavy users of energy. However, the British industrial competitiveness scheme (Bics) only takes effect in April 2027, and even though the subsidy is backdated to this year, Phipson said it would come too late for many firms.
Paul Nowak, the TUC general secretary, joined Make UK's call for action, saying thousands of well-paid jobs, many in some of the poorest areas of the UK, are at risk. He called for the Bics scheme to be expanded further "to protect jobs and keep factories and plants running."
Energy Market Challenges
Britain's gas and electricity prices are intertwined because of a system of marginal pricing that means gas used in electricity generation, which mostly comes from renewables and nuclear, dictates the final price of electricity. The government recently indicated it plans to review the policy but has yet to outline how and when marginal pricing could be abolished or reformed.
The UK is more reliant on gas than other countries. A report by the House of Commons library earlier this month showed that in 2024, gas accounted for 30% of the UK's electricity generation compared with 16% in Germany and 3% in France.
Phipson said the survey found that more than half of respondents have yet to see any benefits from the government's industrial strategy set out last summer.
Government Response
A government spokesperson said: "Our manufacturing industries are vital to the UK's success and economic growth, but we recognise the challenges they are facing, including on the cost of energy. We are tackling this through our modern industrial strategy, cutting electricity costs for industries across Great Britain, and announcing new support for the chemicals and ceramics industries. We will continue to work closely with manufacturing businesses across the UK to ensure we're doing what we can to help them through tough times."
