Britain’s reputation as a major manufacturing power is under threat as persistently high energy costs force companies to curb investment and squeeze competitiveness, according to business organisations representing the sector.

A joint report by the Confederation of British Industry and Energy UK highlights that industrial electricity and gas prices remain far above pre-Ukraine war levels, contributing to an environment in which around four in ten firms have reduced planned investment due to elevated bills.

This pressure comes as manufacturing orders and output remain weak, reinforcing concerns that high operating costs could accelerate deindustrialisation and undermine the sector’s contribution to economic growth.

The report underscores that UK industrial energy prices are among the highest in the Group of Seven advanced economies, deterring new investment and making exports less competitive internationally.

Electricity costs for businesses are still significantly above those seen in major European and North American competitors, and almost nine in ten companies surveyed reported energy bills rising over the last five years.

Business leaders warn that without substantial reductions in energy costs, firms face increased risks of job losses, production cuts and closure of plants that have historically anchored regional economies.

Manufacturers and small business associations have urged the government to go beyond existing support measures, such as targeted subsidies for energy-intensive users, to introduce wider reforms that lower prices across the board.

They argue that a comprehensive review of the energy market and regulatory framework is needed to attract investment and support long-term competitiveness.

The Confederation of British Industry’s chief economist described the current juncture as pivotal for the UK’s industrial strategy, noting that sectors from chemicals to heavy manufacturing are already feeling severe financial strain due to high energy costs.

The government has responded by acknowledging that energy costs are one of the greatest challenges facing industry, and ministers say they are progressing measures designed to cut electricity bills significantly for thousands of businesses.

Plans include schemes aimed at reducing industrial energy charges and supporting infrastructure upgrades to integrate more renewable generation and lower overall prices.

However, industry leaders maintain that more comprehensive market reforms are necessary to ensure the UK retains its manufacturing capability, attract fresh investment and safeguard jobs in energy-dependent sectors.