ELECTRICITY prices in the UK are putting British steelmakers at an ‘increasingly severe’ disadvantage, a new UK Steel report has warned.
The report, Competitive electricity prices: a prerequisite for reindustrialisation, found that British steel producers are paying £91/MWh for electricity in 2026/27 – compared with just £61/MWh in France and £79/MWh in Germany.
The disparity with France has widened despite recent Government interventions, as high wholesale electricity costs continue to undermine British industry’s competitiveness, UK Steel warned.
The picture is even more stark internationally, it continued – UK steelmakers face electricity prices 125% higher than producers in Alberta, Canada, 68% higher than Vietnam, and 71% higher than Turkey.
The gap with France alone will cost British steelmakers an additional £66 million in 2026/27, bringing the cumulative additional cost since 2017/18 to an estimated £917 million, the report states.
Independent modelling by energy consultancy Baringa identifies a wholesale electricity price rebalancing mechanism that would align British industrial electricity prices with those faced by European competitors.
The mechanism would compensate energy-intensive industries when British wholesale prices are higher, but require payments back when British prices fall below the European benchmark.
UK Steel said that the proposed scheme would cost an estimated £51 million annually between 2026 and 2030, equivalent to approximately 42p per UK household per year. Furthermore, it is forecast to generate a net financial return averaging £13 million annually between 2031 and 2035 – rather than becoming a permanent one-way subsidy.
Peter Brennan, director general of UK Steel, said, “British steelmakers are being asked to compete with one hand tied behind their backs. Despite welcome Government action, our electricity prices remain vastly higher than those of our European and global competitors, and the gap with France is getting worse.
“Fixing this problem need not be difficult or expensive. For the equivalent of just 42p per household a year, the Government could level the playing field for a strategically vital industry, unlocking investment, supporting thousands of skilled jobs, and giving British steelmakers a fighting chance against international competition.
“Our proposal is a two-way mechanism that protects industry when British prices are uncompetitive and returns money when they fall below European levels. It is a practical, affordable solution that could be delivered quickly.
“The Government has rightly made reindustrialisation a national priority. But we cannot rebuild British manufacturing while forcing our steelmakers to pay substantially more for electricity than their competitors.”
