British steelmakers are facing an increasingly difficult competitive landscape as electricity costs significantly outpace those of their European counterparts. Analysis from industry lobby group UK Steel indicates that the premium paid for electricity in Britain compared to France has climbed to nearly £30 per megawatt hour (MWh), marking the most challenging disparity recorded in three years.
The surge in energy expenses follows sharp increases in global gas prices, triggered by the ongoing conflict between the US, Israel, and Iran. Because the UK energy market ties wholesale electricity prices to gas, manufacturers are exposed to price shocks even when generating power from cheaper sources like wind or solar. This reliance is particularly problematic for firms transitioning to cleaner electric arc furnace technology, which requires significant, consistent power. Such as wind or solar power, and Iran’s closure of the strait of Hormuz in response to Donald Trump’s bombing campaign has caused global gas prices to soar, the way the market is set up means that the wholesale gas price determines the price of electricity even from other sources that cost much less to produce. However, would be to set up more cheap renewables – a challenge in the short term – or to directly subsidise prices, the main option to bring the price down further.
Comparisons with the European Union are vital for the sector, as the bloc serves as the primary market for British manufactured goods, accounting for approximately 75% of exported steel worth nearly £3 billion. While the price gap with France has reached £30 per MWh, it remains below the record £153 peak seen during the 2022 energy crisis following Russia’s invasion of Ukraine. Meanwhile, the cost differential with Germany has eased slightly this year to about £12 per MWh. Although it remains below the £153 reached in 2022 when Russia’s invasion of Ukraine caused a crisis in the global gas market, the gap with France had fallen in the previous three years to reach £18 a MWh last year.
UK Steel director general Peter Brennan warned that the current cost structure hampers the nation’s industrial ambitions. He stated that British steelmakers are competing with one hand tied behind their backs, arguing that despite government efforts, electricity prices remain substantially higher than global competitors. Brennan urged the government to implement a price cap, estimating the initiative would cost roughly £51 million annually by having the state cover price spikes while industry rebates the government during lower-cost periods. Energy prices have long been one of the main factors businesses cite when asked what is holding back British industry. While in Germany heavily polluting coal still plays a large role in generation, electricity prices in France are mainly determined by its nuclear reactors.
Addressing the energy burden is a central challenge for regional leaders like Andy Burnham, who view affordable power as essential to the broader goal of reindustrialising the UK.
Under Prime Minister Keir Starmer, the government previously eliminated several policy-driven costs for heavy industrial users.
Officials maintain they are aggressively addressing these concerns, noting that current measures have reduced electricity bills by up to 25% for over 10,000 manufacturing businesses and lowered costs by £1 billion annually for the most energy-intensive firms. A government spokesperson said: “We are tackling industry’s number one concern head-on by reducing electricity bills by up to 25% for over 10,000 manufacturing businesses, and cutting costs for hundreds of our most elect.
Beyond energy policy, the government recently introduced job support measures targeting over 100,000 opportunities across eight key growth sectors. These initiatives, integrated into the national industrial strategy, aim to boost employment for young people in sectors ranging from construction and defence to professional services. Similar programs for clean energy and financial services are already underway, with further strategies for advanced manufacturing and creative industries expected shortly. “The government has rightly made reindustrialisation a national priority. With a focus on professional and business services, the defence sector and construction, the “jobs plans” are intended to help young people find work.
