Companies unprexpectedly provided an additional £29bn to cover unusually high energy expenses
The UK's industrial sector has been hit hard by surging energy costs, shedding an extra £29bn over the past four years due to rising gas and electricity expenses. According to the Energy and Climate Intelligence Unit (ECIU), gas prices have more than doubled compared to pre-crisis levels, even while industrial demand has dropped by over 10%. Electricity costs have skyrocketed by around 60% as well.
The iron and steel sector has been particularly crushed by this energy crisis. Energy bills for the average plant have skyrocketed by 80% since the crisis began, adding a massive £1.8bn to the sector's burden despite production decline by 25%.
Jess Ralston, an energy analyst at ECIU, stated, "The UK has been disproportionately affected by the gas crisis because gas prices largely dictate the wholesale price of electricity 97% of the time. As households saw their energy bills skyrocket, industry has been coping with similar astronomical increases in their energy expenses due to high gas prices."
The findings highlight the devastating effects of the energy crisis on firms, reinforcing calls for the government to lower energy prices when it releases its industrial strategy. The Starmer administration plans to publish the strategy next week, with energy costs among the key issues they aim to address.
A recent cross-party Business and Trade Committee report cited high electricity prices as a deterrent for investment and a hindrance to UK industries' ability to keep up with international competition. Meanwhile, the head of the CBI called for a "serious" plan to address punitive energy costs, suggesting the removal of net-zero policy costs that add to businesses' bills.
In response to the ECIU report, industry minister Sarah Jones said, "These findings emphasize the need for our clean power mission, which will help protect business and household finances by transitioning to clean, homegrown energy that we have control over. We understand that energy costs for UK industries have skyrocketed due to rising gas prices, so we are taking steps to bring them closer to parity with other major economies via the British Industry Supercharger, saving businesses £5bn over the next ten years."
- The energy crisis in the UK has significantly impacted the finance sector, as the industrial strategy proposes addressing high energy prices, which are a deterrent for investment and hinder the UK's competitiveness in the global markets.
- The iron and steel industry, in particular, has been affected by substantial increases in energy expenses due to surging gas prices, with energy bills for the average plant escalating by 80%, adding a significant burden to the sector despite a 25% production decline.
- The UK government recognizes the financial burden imposed by high energy costs on industries and has proposed a clean power mission to transition to homegrown, clean energy, aiming to bring energy costs closer to parity with major economies, saving businesses £5bn over the next ten years.
