According to a survey by Make UK, the manufacturers’ trade body, thousands of British industrial companies are warning of potential bankruptcy within the coming year as they struggle with energy costs significantly higher than international competitors. The research indicates that energy prices in the UK are approximately twice those in continental Europe and four times higher than in the United States, creating unsustainable operating conditions for many firms.
The survey findings reveal substantial challenges across the sector. Approximately 25% of manufacturing companies have already relocated production overseas or are planning to do so in response to cost pressures. Additionally, roughly 10% of companies report that insolvency within the next 12 months is likely or very likely. Nearly half of industrial firms experienced further energy bill increases since Middle East geopolitical tensions escalated, though 60% of these companies passed costs along to customers. Despite these pricing adjustments, nearly all surveyed companies expect significant profit margin compression in the coming quarter.
To cope with deteriorating financial conditions, companies are implementing defensive measures. Approximately 38% have delayed capital investments, while over 20% have reduced their workforces. Business confidence has fallen to a four-year low, with executives expressing pessimism about future prospects despite relatively stable factory output in the recent quarter.
Make UK is advocating for government intervention, specifically requesting that the Treasury subsidize industrial energy taxes and levies through general taxation, similar to policies in France and Germany. Currently, approximately 50% of industrial energy bills consist of government-imposed carbon taxes and grid upgrade levies, totaling around £3 billion. While the government implemented a subsidy scheme in April reducing bills by up to 25% for heavy energy users, the main British Industrial Competitiveness Scheme does not take effect until April 2027, prompting concerns that many companies may not survive until relief arrives.
The government has acknowledged manufacturing challenges and indicated commitment to supporting the sector through its industrial strategy and electricity cost reduction initiatives, though stakeholders argue that more immediate and substantial action is required to prevent deindustrialization.
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