Government must regulate industrial energy market, says Make UK
27 January 2025 
Make UK is calling for the Government to create an industrial energy market regulator to protect businesses – particularly SMEs – from the impacts of poor behaviour by energy companies. It also wants the Government to introduce support for industrial energy users to level the playing field with European competitors, and to remove or offset levies, such as the Climate Change Levy, for manufacturers, along with other renewable energy surcharges.
The Government should also give stronger incentives for on-site energy generation, as well as an industrial energy price cap, Make UK suggests. Equalising pricing to Eurozone pricing through a variable energy subsidy would also be hugely beneficial to drive growth and industrial expansion in the UK.
Furthermore, the Government needs to accelerate upgrades to the UK’s grid capacity so that UK businesses are not forced to move abroad because of a lack of network capacity.
These demands are based on new research by Make UK and the energy adviser Inspired PLC which shows that one in three UK manufacturers haven’t revised their energy procurement strategies since the 2022 energy crisis. While this may be prudent for those on longer-term fixed contracts, it leaves them vulnerable to any potential subsequent crisis.
The report, Energy Procurement: The Cost of Complacency, also finds that one in five UK manufacturers does not have a clear strategy to protect them from volatility in Britain’s energy market. While the record energy price peaks of early 2022 may have abated, many businesses are still struggling to meet their energy needs, it suggests. Working without an energy strategy can leave companies “catastrophically exposed” to energy market disruption, Make UK warns.
According to the report, the UK industrial users do not have the protection afforded to domestic consumers through the price cap.
The UK imposes several energy-related taxes and levies which add to energy for industrial users. Some European countries offset such levies for energy-intensive industries to maintain competitiveness. While the UK has introduced some levy exemption schemes, there is more to be done, Make UK argues.
European countries such as Germany and France provide more substantial subsidies or compensatory frameworks for industries exposed to high energy costs, such as partial exemption from certain grid fees or renewable energy surcharges. France goes further, maintaining tight control over energy pricing for industrial consumers through regulated tariffs tied to nuclear energy costs.
“Energy forms a huge part of UK manufacturers’ input mix, subsequently accounting for a large proportion of production costs,” senior Make UK economist, James Brougham, points out. “With differing playing fields for UK producers when compared to those abroad, even in our closest neighbours within Europe, it’s little surprise that the sector struggles to remain competitive even where productivity enhancements elsewhere have been sought.
“Compounding the risk, the significant proportion of the sector that is exposed to what is effectively the ‘wild west’ of energy markets in terms of regulation and support without a formal strategy in place further highlights the need for intervention lest we see the UK’s production base continue to erode.”
“While energy prices are much lower than they were during the peak of the energy crisis, they are still around twice the pre-pandemic average,” adds Dan Hulme, head of sales for key accounts at Inspired PLC. “This is not a time to be complacent.”
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