According to a CBI and Energy UK report, 40% of businesses have been forced to cut investment due to rising fuel prices.
In a message to ministers, the report said British businesses – from chemical producers to pubs and restaurants – were being undermined by a failure to cut prices and upgrade the UK’s aging gas and electricity networks.
The report said a far-reaching review of outdated regulations governing the sale and supply of energy is also needed to encourage investment and boost economic growth.
Energy UK, which represents more than 100 electricity generators and retailers, says business electricity costs are 70% higher than before Russia’s invasion of Ukraine, and gas prices are 60% higher.
A survey based on the report found that nearly 90% of firms have seen their energy bills rise over the past five years, while four out of 10 have cut investment.
Without a reduction in energy bills, “the risk of job losses, production cuts, plant closures and offshoring will increase,” the report said.
The CBI and Energy UK say ministers need to join hands with industry to carry out a comprehensive review of the UK’s energy needs and how they can be met during the transition to net zero.
The task force, made up of researchers from both institutions and industry groups, will examine how the reforms could lower prices and improve the efficiency of gas and electricity networks.
It aims to convince ministers that programs to improve the UK’s energy system have not gone far enough, leaving the UK at risk of widespread industrialisation.
The UK has one of the most expensive industrial fuel prices in the developed world. They are almost two-thirds above the median of International Energy Agency (IEA) countries and the highest among G7 members.
As an indication of the impact, figures for 2025 show that the UK’s goods trade has fallen to its worst performance on record. Britain reported a deficit of £248.3bn for goods – £30.5bn more than the previous year.
The widening gap was only partly filled by a £192bn surplus in Office for National Statistics services, up £16.4bn on the previous year.
Last year manufacturers’ lobby group, Make UK, said the government should provide millions of pounds of extra subsidies to prevent the industry from shrinking.
CBI Chief Economist Lewis Hellem said that the industrial sectors are already facing severe financial pain due to the sudden increase in fuel prices.
“You can already see it in the chemical industry, which has seen many closures,” she said.
Hellem described the year as a “pivotal moment” for the UK’s industrial strategy.
Among medium-sized businesses, UK electricity prices are double the EU average. Nondomestic gas prices are in line with the EU, but much higher than in the likes of the US and Canada, the report said.
“This acts as a brake on ambitions for economic growth. Also, businesses cannot invest in switching to clean energy – even if they know the long-term benefits of doing so – which again undermines one of the government’s key policies,” the report said.
Energy Minister Ed Miliband has sought to protect the UK’s biggest energy consumers. Last year, the government said it would cut electricity prices by up to £40 per megawatt hour for 7,000 “heavy users” to “move the UK from the middle of the pack to the right outside”.
Dhara Vyas, head of Energy UK, said she was concerned thousands of businesses outside the Ringfence would continue to be hampered by high energy bills.
She said the government has made significant progress in reducing domestic energy costs. But the help provided to some industrial consumers is not just “a sticking plaster” but is being funded by other bill payers as well.
She added: “Reducing prices for all businesses is fundamental to the UK’s growth story.”
She said the preliminary report showed “how high energy costs are holding back the UK economy and the limits of existing support”.
“But our aim is not only about how to reduce bills. It is first to see how we can make the energy market and regulations more effective,” she said.
