UK steelmakers have fallen further behind their European competitors on electricity costs, reaching a premium of nearly £30 per megawatt hour over France, the highest differential recorded in three years, according to analysis by the industry lobby group UK Steel.
The deterioration stems from geopolitical tensions affecting global energy markets. Iran’s closure of the strait of Hormuz in response to military action has triggered a significant increase in worldwide gas prices. This development has particular significance for British manufacturers because the UK relies heavily on gas for electricity generation, which is essential for cleaner steelmaking using electric arc furnaces. The market structure means that wholesale gas prices effectively set electricity rates across all generation sources, including renewables that cost considerably less to produce.
In contrast, France benefits from substantially lower electricity costs due to its reliance on nuclear power generation, while Germany maintains relatively moderate costs through continued use of coal-based generation. The competitive disparity is especially consequential for UK industry since approximately 75% of exported steel goes to EU markets, representing roughly £3 billion in annual trade. Although the price gap with France had narrowed to £18 per megawatt hour in the previous period, the current widening represents a reversal of that trend.
Government policy adjustments implemented earlier have reduced some electricity cost burdens for heavy industrial businesses. However, UK Steel’s director general Peter Brennan stated that direct subsidies represent the most viable option for further relief. The organization has proposed a pricing mechanism estimated to cost approximately £51 million annually, whereby the government would cover costs when prices exceed a predetermined cap and receive payments when prices fall below it.
Separately, the government announced workforce development initiatives on Monday targeting over 100,000 opportunities across eight priority growth sectors aligned with its industrial strategy. These programs focus on sectors including professional services, defence, and construction, with prior announcements covering financial services, clean energy, and life sciences. Additional plans for advanced manufacturing and creative industries are anticipated in the coming period.
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