Manufacturers warn that upcoming Industrial Strategy will be fatally flawed

11 June, 2025

Make UK has made it clear that an ambitious and effective industrial strategy is not optional. It is essential to ensuring the UK remains competitive, secure, and economically productive in the coming years. For that strategy to make the impact manufacturers across Britain desperately need, it must address the energy crisis that leaves firms at a massive competitive disadvantage. With industrial energy prices four times those in the US and 46% above the global average, the Government must act now.

A new report, Tackling Industrial Energy Costs, published recently by Make UK sets out solutions which the Government should place at the heart of the strategy, which are both deliverable and costed. In particular it urges Government urgently to reform the complex and unfair policy levies that make low-carbon energy more expensive than fossil fuels.

These costly policy levies are currently applied only to UK industrial bills and not across the rest of Europe. Making this change would cut energy costs by 15% immediately. If coupled with an agreed a fixed energy price for Britian’s manufacturers, the resulting cost reduction would be significant. Both sides would take risk here. Government would pay manufacturers the difference if the cost of energy went above the agreed “strike” price, with manufacturers paying Government if the cost of energy fell lower than the agreed fixed rate.

Make UK recommends that the electricity price £56/MWH which equates to a 10% reduction in retail prices paid by manufacturers. When the savings are added to those gained by removing the policy levies from bills, UK manufacturers would be on a par with European industrial energy bills.

Stephen Phipson, CEO Make UK said: “If we do not address the issue of high industrial energy costs in the UK as a priority, we risk the security of our country. We will fail to attract investment in the manufacturing sector and will rapidly enter a phase of renewed de-industrialisation.

UK manufacturers have faced energy prices far above those of European competitors for many years, undermining their ability to invest, grow, and compete globally.

More inaction risks compounding this disadvantage and forcing the government to make difficult choices over costly bailouts) or managed decline of the UK manufacturing sector.

Today we have set out a clear package of deliverable, sensible, and popular policies to tackle this issue with the urgency it requires.”

Alan Johnson, Senior Vice President for Manufacturing, Supply Chain and Purchasing AMIEO, Nissan Motor Corp. said: “The Nissan Sunderland manufacturing plant has the highest energy costs of all Nissan plants across the globe. The proposals being put forward by Make UK – under the umbrella of a new Industrial Strategy – would send a strong message to investors that the UK remains committed to creating a more competitive environment for electric vehicle manufacturing.”

Read the full report here: https://drive.google.com/drive/folders/1T_5CL4YfuF_gY2W7rOfIOuHfxySTfpJq?usp=sharing

Make UK based the analysis on two pieces of published OBR work. First, their assessment of the supply-side consequences of changes in oil and gas prices (tailored to industrial electricity prices), and second, their model of how the economic capital stock adjusts to changes in corporation tax rates.The key insights from this are that changes in electricity prices need to be sustained to deliver lasting supply-side economic benefits, and that those benefits, on the OBR’s reckoning, reach their full impact after eight years, with two-thirds of the effect felt within five years (their forecast horizon).