UK industrial strategy ‘fatally flawed’ unless energy prices are cut
2 June 2025 
Image: Nissan
Britain’s manufacturers are calling on the Government to commit to cutting industrial energy costs as part of its forthcoming Industrial Strategy, thus allowing UK manufacturing to grow to its full potential and avoiding a looming period of de-industrialisation. Make UK, the manufacturers’ organisation, is warning that unless “sky-high” energy costs are tackled, the strategy will be “fatally flawed” .
It says that Government must urgently reform the “unfair” policy levies that make low-carbon energy more expensive than fossil fuels, to “unleash UK manufacturing’s full potential in driving growth”.
Make UK believes that the new industrial strategy is essential to ensure that the UK remains competitive, secure, and economically productive. But to make the impact that manufacturers across Britain “desperately need”, the strategy must address the energy crisis that leaves firms at a massive competitive disadvantage. With industrial energy prices in the UK being four times higher those in the US, and 46% above the global average, the Government needs to act now, the organisation says.
In a new report, Tackling Industrial Energy Costs, Make UK sets out several ways in which energy pricing should be at the heart of the Government’s strategy – in particular, it is calling for an urgent reform of the “complex and unfair policy levies that make low-carbon energy more expensive than fossil fuels”.
These levies are currently applied only to industrial bills in the UK and not across the rest of Europe. Making this change would cut energy costs by 15% immediately. If coupled with an agreed fixed energy price for British manufacturers, the resulting cost reduction would be significant.
Both sides would take risks here, the organisation says. If the cost of energy went above an agreed “strike” price, the Government would pay manufacturers the difference. If the cost of energy fell lower than the agreed rate, the manufacturers would pay the Government.
Make UK is recommending an electricity price of £56/MWh, which it says equates to a 10% reduction in retail prices currently paid by manufacturers. When the savings are added to those gained by removing the policy levies from bills, industrial electricity prices in the UK would then be on a par with those in Europe.
“If we do not address the issue of high industrial energy costs in the UK as a priority, we risk the security of our country,” warns Make UK CEO, Stephen Phipson. “We will fail to attract investment in the manufacturing sector and will rapidly enter a phase of renewed de-industrialisation.
“UK manufacturers have faced energy prices far above those of European competitors for many years, undermining their ability to invest, grow, and compete globally,” he adds. “More inaction risks compounding this disadvantage and forcing the government to make difficult choices over costly bailouts) or managed decline of the UK manufacturing sector. Today we have set out a clear package of deliverable, sensible, and popular policies to tackle this issue with the urgency it requires.”
Alan Johnson, senior vice-president for manufacturing, supply chain and purchasing at the car-maker Nissan, reveals that the company’s plant in Sunderland in North-East England has the highest energy costs of any Nissan plant worldwide. “The proposals being put forward by Make UK – under the umbrella of a new Industrial Strategy – would send a strong message to investors that the UK remains committed to creating a more competitive environment for electric vehicle manufacturing,” he says.
Make UK based its analysis of energy process on two pieces published by the Office for Budget Responsibility. The key insights from these studies are that changes in electricity prices need to be sustained to deliver lasting supply-side economic benefits, and that those benefits, on the OBR’s reckoning, reach their full impact after eight years, with two-thirds of the effect felt within five years
