The time for talking is over. The time for action is now.
Britain's manufacturing sector, once the engine of national prosperity, now stands at a precipice — not from lack of skill or ambition, but from the quiet, relentless pressure of energy costs that have made production on home soil economically irrational. With electricity prices twice Europe's average and four times those in the United States, thousands of industrial firms face a choice between relocation, insolvency, or slow attrition. The question being asked is not merely one of policy, but of whether Britain still intends to be a nation that makes things — and for whom that answer will arrive too late.
- One in ten UK manufacturers now consider insolvency within the next twelve months likely, while a quarter have already begun moving production to countries where energy is cheaper.
- Nearly half of industrial businesses have seen their energy bills rise further since Middle East conflict disrupted global gas markets, and 98 percent expect a significant squeeze on profits in the coming quarter.
- The crisis is splitting the industrial base in two: large foreign-owned firms can relocate, while smaller domestic manufacturers are left to cut jobs and freeze investment just to survive.
- A government subsidy scheme exists, but its April 2027 start date means relief may arrive after the firms it was designed to save have already closed or left.
- Trade unions and industry bodies are now speaking with one voice, urging the Treasury to absorb carbon levies and reform the marginal pricing system before deindustrialisation becomes irreversible.
Britain's manufacturing sector is approaching a breaking point. A survey by Make UK, the manufacturers' trade body, has found that one in ten industrial companies now consider insolvency within the next year likely — and the driving force is energy. UK electricity and gas prices run twice the continental European average and four times the cost in the United States, a disparity that has made domestic production increasingly untenable.
The pressure has sharpened since conflict in the Middle East began pushing global gas prices higher. Nearly half of industrial businesses have absorbed further bill increases as a result, and 98 percent expect profitability to contract sharply in the coming quarter. In response, more than a third of firms have delayed investment in new equipment, and over a fifth have cut staff. A quarter have moved production overseas or are actively planning to do so.
The crisis is not falling evenly. Britain's roughly 800 large manufacturers — most of them foreign-owned — have the scale and flexibility to relocate. Smaller, domestically rooted firms do not, and are instead quietly hollowing out: shedding workers, deferring growth, and waiting. Many of these companies sit in economically deprived regions where their jobs carry particular weight. The TUC's general secretary, Paul Nowak, has joined Make UK in calling for urgent government action.
The government has extended a subsidy scheme offering up to 25 percent relief on energy bills for heavy industrial users, but the British Industrial Competitiveness Scheme does not take effect until April 2027. Make UK's chief executive Stephen Phipson has warned that for many firms, that timetable is simply too late.
Underlying the crisis is a structural flaw in how Britain prices electricity. The UK uses a marginal pricing system in which gas — even though most power comes from renewables and nuclear — sets the cost of all electricity. With gas accounting for 30 percent of UK electricity generation compared to 16 percent in Germany and just 3 percent in France, Britain is uniquely exposed to global gas shocks. Make UK is calling on the Treasury to absorb the roughly £3 billion in annual carbon levies and grid charges that currently fall on industrial energy bills — a model already operating in France and Germany — while the government has signalled a review of marginal pricing without yet committing to a timeline.
Britain's manufacturing sector is sliding toward a cliff. A survey of the country's industrial companies, conducted by Make UK, the manufacturers' trade body, has found that thousands of firms are warning of potential bankruptcy within the next twelve months—and the culprit is energy costs that have become economically unsustainable. The numbers are stark: electricity and gas prices in the UK run twice as high as the continental European average and four times the cost in the United States. For a nation that once built its wealth on industrial output, this is a crisis.
The survey's findings paint a picture of an industry in distress. One in ten manufacturing companies now believe insolvency within the next year is likely or very likely. A quarter of manufacturers have either already moved their production overseas or are actively planning to do so, chasing cheaper energy in mainland Europe and Asia. Stephen Phipson, Make UK's chief executive, described the situation with unusual bluntness: "The time for talking is over. The time for action is now." He warned that without immediate relief on energy prices, Britain faces deindustrialisation—a word that carries the weight of historical decline.
The pressure on these companies has intensified recently. Since the conflict in the Middle East began, nearly half of industrial businesses have been hit with further increases in their energy bills. Many have passed these costs on to customers, raising prices in an attempt to protect margins. Yet the strategy has failed almost universally: 98 percent of companies told Make UK they expect a significant squeeze on profitability over the coming quarter. Faced with shrinking margins, firms have begun making hard choices. Thirty-eight percent have delayed investment in new equipment and facilities. More than a fifth have cut their workforce.
The pattern of response reveals a split in the industrial base. The roughly 800 large manufacturing companies in Britain—mostly foreign-owned—are relocating production to countries with cheaper energy. The smaller, domestically owned firms lack that option and are instead cutting investment and jobs to survive. This divergence threatens to hollow out the industrial heartland. Paul Nowak, general secretary of the TUC, joined Make UK's call for urgent action, noting that thousands of well-paid jobs are at risk, many in some of the poorest regions of the country.
The government has attempted to address the problem. In April, it extended a subsidy scheme that reduces energy bills by up to 25 percent for 10,000 companies classified as heavy energy users. But there is a critical timing problem: the British Industrial Competitiveness Scheme, or Bics, does not take effect until April 2027. Although the subsidy is backdated to this year, Phipson said the delay will come too late for many firms. Companies that might otherwise benefit from government spending on defence and industrial strategy could already be bankrupt or relocated by then.
The root of the problem lies partly in how Britain generates and prices electricity. The UK relies on a system of marginal pricing, where gas used in electricity generation—even though most power comes from renewables and nuclear—sets the final price for all electricity. This mechanism means that when gas prices spike globally, electricity prices follow. Britain is more vulnerable to this than other European nations: in 2024, gas accounted for 30 percent of UK electricity generation, compared with 16 percent in Germany and just 3 percent in France. The government has indicated it plans to review marginal pricing but has not yet outlined how or when reform might occur.
Make UK is calling on the Treasury to absorb the cost of taxes and levies paid by industrial businesses, using general taxation to fund the relief—a model already in place in France and Germany. About half of what industrial companies pay in energy bills, roughly £3 billion annually, consists of government carbon taxes and levies designed to cover the cost of upgrading the national electricity grid. Without intervention, the survey suggests, the industrial base that once defined Britain's economic power will continue to erode, with jobs and production capacity moving elsewhere and smaller firms simply disappearing.
Citações Notáveis
Britain faces deindustrialisation unless manufacturers get relief from high energy prices. The time for talking is over. The time for action is now.— Stephen Phipson, chief executive of Make UK
Thousands of well-paid jobs, many in some of the poorest areas of the UK, are at risk and need protection through expanded support schemes.— Paul Nowak, general secretary of the TUC
A Conversa do Hearth Outra perspectiva sobre a história
Why is the timing of this subsidy scheme so damaging if the money is being backdated?
Because bankruptcy doesn't wait. A company facing insolvency in the next six months doesn't benefit from a cheque that arrives in April 2027, even if it's technically dated to cover this year. By then, the firm may have already closed or relocated.
So the government knows about the problem but the solution is structurally too slow?
Yes. They've diagnosed the issue—energy costs are uncompetitive—but the remedy they've designed has a built-in delay that defeats its own purpose for the companies most in danger.
Why can't they just reform marginal pricing immediately?
That's the question everyone's asking. The government says it's reviewing the policy, but there's no timeline. Marginal pricing is complex—it affects how the entire electricity market functions—so reform isn't a simple switch. But the cost of delay is real companies closing.
Are the large foreign-owned manufacturers the ones leaving?
Mostly, yes. They have the capital and the global operations to relocate. The smaller British-owned firms can't do that, so they're cutting jobs and investment instead, trying to survive on thinner margins.
What does deindustrialisation actually mean for a place like Britain?
It means losing the capacity to make things. Once a factory closes and production moves abroad, it's rarely rebuilt. You lose skilled workers, supply chains, the knowledge embedded in communities. It's not just an economic statistic—it's the hollowing out of regions that depended on that work.
Is there any sign the government understands the urgency?
They're talking about it, extending subsidies, mentioning industrial strategy. But the gap between what they're saying and what they're actually doing—the timing, the scope, the speed—suggests they may not fully grasp how close some of these companies are to the edge.