# UK Steelmakers Face Competitive Disadvantage Due to Rising Electricity Costs High gas-linked power prices widen the cost gap against European rivals to three-year highs. - **Source:** [Business | The Guardian](https://www.theguardian.com/uk/business) - **Published:** 2026-10-18 - **Topic:** [Business](https://brifing.si/c/business) - **Original article:** - **On Brifing:** https://brifing.si/s/05f68235-4ddc-49e9-94e6-9bd23b80476c ## Escalating Energy Cost Disparity British steelmakers currently face their worst competitive position against European rivals in three years. The premium paid for electricity over French counterparts has surged to nearly £30 per megawatt hour. This widening gap directly threatens the viability of domestic production, as energy remains the primary obstacle to the government's stated goal of national reindustrialisation. ## Gas Dependency Drives Prices The UK's electricity market structure links wholesale power prices directly to global gas costs, regardless of the generation source. Recent geopolitical tensions, specifically the US-Israeli conflict with Iran, triggered a sharp rise in global gas prices. This mechanism penalizes British manufacturers, even when utilizing cheaper renewable energy sources like wind or solar power. ## Comparative European Energy Models France maintains a significant cost advantage due to its reliance on nuclear reactors for electricity generation. Meanwhile, Germany continues to utilize coal-fired power, which influences its own pricing structure. These divergent energy mixes create uneven playing fields, complicating the ability of UK steelmakers to compete effectively within the EU, their primary export market. ## Historical Context of Price Gaps The current £30 per megawatt hour premium follows a period where the gap had narrowed to £18 last year. While this remains significantly lower than the extreme £153 peak observed during the 2022 energy crisis caused by the Russian invasion of Ukraine, the recent upward trend signals a return to heightened industrial cost pressures. ## Policy Interventions and Limitations Under Keir Starmer, the government removed several policy-related costs from industrial electricity bills last year. Despite these efforts, industry leaders argue that current prices remain vastly higher than global competitors. The government claims to have reduced bills by up to 25% for over 10,000 manufacturing businesses, yet the core structural pricing issue persists. ## Proposed Subsidy Mechanisms UK Steel director general Peter Brennan advocates for direct price subsidies as the only viable short-term solution. The lobby group proposes a price cap estimated to cost £51 million annually. This model would involve the government covering costs when prices exceed a specific threshold, while industry would reimburse the state during periods of lower pricing. ## Broader Industrial Strategy Goals The government is simultaneously launching jobs plans across eight key growth sectors to support over 100,000 workforce opportunities. These initiatives focus on professional services, defence, and construction, with future plans for advanced manufacturing. However, these workforce investments face friction if energy-intensive industries like steel cannot maintain operational cost parity with their international peers. ## Strategic Outlook for Manufacturing Rebuilding British manufacturing requires balancing long-term renewable energy expansion with immediate cost mitigation for energy-intensive firms. Without addressing the gas-linked pricing mechanism, the sector remains vulnerable to global geopolitical volatility. Future success depends on whether the government adopts direct subsidy interventions or accelerates the transition to cheaper, non-gas-dependent power generation infrastructure. ## Sources covering this story - https://www.theguardian.com/business/2026/oct/19/electricity-costs-uk-steelmakers-worst-position-three-years-eu-rivals — --- _Summary written by Brifing from the original reporting. Copyright in the original article belongs to its publisher; read the full piece at the link above._