British manufacturers are paying nearly twice as much for electricity as their French competitors, according to a joint report from the Confederation of British Industry and Energy UK that directly blames the cost gap on policies tied to the country’s net zero transition. The findings land as output in the UK’s energy-intensive industries has fallen to a 35-year low, raising urgent questions about whether climate policy is inadvertently hollowing out the industrial base it was designed to green. With business groups warning that the UK’s standing as a manufacturing power is at stake, the debate over who bears the cost of decarbonization has reached a sharp new pitch.
UK Electricity Costs Dwarf European Rivals
The scale of the price disparity is stark. Among medium-sized businesses, UK electricity prices are around double the EU median, according to the CBI and Energy UK report. That same analysis found UK industrial energy prices sit almost two-thirds above the median tracked across advanced economies. These are not marginal differences that companies can absorb through efficiency gains or contract renegotiation; they represent a structural cost penalty that compounds with every kilowatt-hour consumed and shapes investment decisions for years ahead.
The International Energy Agency’s regularly updated industrial price benchmarks provide the most widely used reference point for comparing electricity costs across OECD and IEA member countries, and they consistently place the UK towards the upper end of the price league table. France, by contrast, benefits from a power system dominated by nuclear generation and state-backed price mechanisms that keep industrial rates well below the European average. The result is a competitive gap that widens every time a UK factory runs a furnace, a kiln, or an electrolysis cell, and that gap is now large enough to influence where global manufacturers choose to build their next plant.
Energy-Intensive Output Hits a 35-Year Low
The price penalty is not theoretical. UK output in energy-intensive industries has dropped to its lowest level in 35 years, with production down by roughly a third since 2021 according to Office for National Statistics data cited in the Financial Times. Sectors such as steel, glass, ceramics, chemicals, and paper, all of which require enormous quantities of electricity and gas, have contracted sharply. These are not sunset industries by nature; many produce the very materials needed for wind turbines, battery components, heat pumps, and building insulation that the net zero agenda demands in greater volumes.
The speed of the decline is what distinguishes this from a gradual structural shift. Losing a third of output in roughly four years suggests that high energy costs are triggering abrupt closures and relocations rather than slow, managed transitions. When a ceramics plant or a specialty chemicals facility shuts down, the jobs, supply chains, and institutional knowledge that supported it do not simply pause; they migrate to jurisdictions where electricity is cheaper and policy risk appears lower. That dynamic creates a tension at the heart of UK climate policy: if domestic production moves abroad, the emissions do not disappear. They simply show up on someone else’s national accounts, while Britain forfeits the innovation and export potential that comes with hosting advanced manufacturing capacity.
How France and Germany Shield Their Factories
The gap is not just about raw energy costs. It also reflects deliberate policy choices by European competitors to protect their industrial bases from the cost of green levies. France and Germany both provide around 90% compensation to energy-intensive manufacturers for the indirect costs of carbon pricing and renewables obligations. That means a French steelmaker or a German chemical producer pays only a fraction of the green policy surcharges that land in full on a UK rival’s electricity bill, even when they are competing in the same export markets and facing the same global demand shocks.
The UK has attempted a response through a scheme called the British Industry Supercharger, which offers partial relief from certain network and policy charges for eligible energy-intensive users. But the compensation rate and scope of that program fall well short of what Paris and Berlin offer. The latest Eurostat data for non-household tariffs confirm that industrial electricity prices across much of the EU remained broadly stable in 2024, suggesting that continental manufacturers have not faced the same upward pressure as their UK counterparts. Within the European Union framework, member states have used state aid rules and energy market reforms to design extensive industrial exemptions, and France in particular has leaned on state ownership and long-term contracts to keep strategic factories on its soil.
Net Zero Policies as the Identified Culprit
Business groups are pointing directly at the UK’s approach to funding its net zero transition. Unlike France, which finances much of its low-carbon electricity system through state ownership of EDF and regulated tariffs, the UK loads a significant share of renewables support costs, capacity market payments, and network investment onto consumer and industrial electricity bills. The result is a set of policy levies that can add 20 to 30 percent to the base wholesale price for industrial users, a burden that the CBI and Energy UK report identifies as the primary driver of the price gap with European competitors and a growing deterrent to new manufacturing investment.
This critique deserves scrutiny, because it is not the whole picture. Wholesale gas prices, which heavily influence UK electricity costs because gas-fired plants still set the marginal price in many hours, have been volatile since 2021. The UK’s relatively high dependence on gas generation compared to France’s nuclear fleet means that global gas market swings hit British industrial bills harder. Net zero policies are a real and measurable part of the cost stack, but they sit on top of a wholesale price that is itself elevated by the UK’s generation mix and legacy infrastructure choices. Blaming net zero alone risks oversimplifying a problem that also has roots in decades of energy policy, including the failure to build new nuclear capacity at the pace France achieved in the 1970s and 1980s and the slow build-out of grid connections for cheaper renewables.
The Risk of Green Leakage
The most consequential risk in this debate is what economists call carbon leakage: the possibility that high domestic energy costs push production to countries with weaker climate policies, increasing global emissions even as the UK’s territorial carbon footprint shrinks. If a UK glass manufacturer closes and its customers start importing glass from a country with a coal-heavy grid and no carbon price, the net effect on the atmosphere is negative. The UK counts a reduction; the world gets an increase, while domestic regions that once relied on these plants for employment face deindustrialization and long-term economic scarring.
Tracking this effect in real time is difficult, but the circumstantial evidence is building. The sharp decline in energy-intensive output documented by the ONS coincides with rising imports in several of those same product categories, according to trade data highlighted in recent coverage of the UK’s global competitiveness. A meaningful test of whether green leakage is occurring would involve monitoring bilateral trade shifts in energy-intensive goods between the UK and lower-cost producers over the next two years. If imports of steel, chemicals, and ceramics rise in proportion to domestic production losses, the case for leakage becomes hard to dismiss. In that scenario, the UK would risk exporting both emissions and high-value jobs, undermining the political coalition needed to sustain ambitious climate targets.
What the Supercharger Scheme Has Not Fixed
The British Industry Supercharger was designed to address exactly this problem, offering qualifying energy-intensive industries exemptions from certain policy-related charges on electricity. In practice, the scheme has not closed the gap. Its eligibility criteria exclude many mid-sized manufacturers that still face punishing bills, and the level of relief it provides does not match the 90% compensation that France and Germany extend. The CBI and Energy UK report’s finding that medium-sized businesses face prices roughly double the EU median suggests the Supercharger is reaching too few firms and offering too little to those it does cover.
A more effective approach would likely require shifting some green levy costs off electricity bills entirely and funding them through general taxation or a dedicated fiscal mechanism. That is politically difficult because it makes the cost of net zero visible in the government’s budget rather than hidden in utility bills. But the current approach is producing its own political costs: factory closures, job losses in industrial communities, and a growing backlash against climate policy from businesses that see themselves as bearing a disproportionate share of the burden. As more companies weigh whether to invest in UK sites or expand abroad, the question is whether the government will adjust course before the country’s industrial base shrinks past the point where recovery is realistic.
A Policy Gap That Threatens the Net Zero Goal Itself
At stake is more than short-term competitiveness. If the UK cannot reconcile its climate ambitions with a viable industrial strategy, it risks eroding public support for net zero altogether. Communities that see factories closing and energy bills rising will be less inclined to back further decarbonization measures, especially if they believe other countries are free-riding on Britain’s efforts. Business groups warn that without a credible plan to align energy costs with those in France and Germany, the UK could find itself locked into a vicious circle of declining manufacturing, rising imports, and mounting political resistance to climate policy.
Bridging this policy gap will require decisions that go beyond tinkering with existing schemes. Options include accelerating investment in low-cost renewables and storage to cut wholesale prices, expanding nuclear capacity, redesigning levies so that they fall more on general taxation and less on industrial users, and improving the transparency of support available to firms through channels such as specialist advisory services that help companies navigate complex subsidy rules in competing jurisdictions. Without such a reset, the UK risks discovering that its current path does not just threaten its status as a manufacturing power; it may also make the net zero goal itself harder to reach by driving the very industries needed for the transition offshore.
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*This article was researched with the help of AI, with human editors creating the final content.
Grant Mercer covers market dynamics, business trends, and the economic forces driving growth across industries. His analysis connects macro movements with real-world implications for investors, entrepreneurs, and professionals. Through his work at The Daily Overview, Grant helps readers understand how markets function and where opportunities may emerge.
