The energy crisis quietly starving British industry

British manufacturing has never avoided a challenge, but right now our factories are being asked to compete with one hand tied behind their backs.

Across Lancashire and the wider north west, commercial energy bills have crossed the line from a painful overhead into an outright existential threat. Today, UK manufacturers are paying roughly four times what a factory in the United States pays for electricity, while comfortably outstripping our competitors in France and Germany. For energy intensive sectors such as glassmakers, chemical plants, foundries, ceramics works, and paper mills that anchor our regional economy, power is no longer just a line item on a spreadsheet. 
It is the single biggest factor of whether a site stays open or closes its doors.

This isn’t bad luck, nor is it the fault of business owners. It is the direct consequence of three fundamental policy and market failures that have left British industry stranded.

The wholesale electricity market runs on a 'pay-as-clear' mechanism: the final generator called upon to meet grid demand sets the price for all electricity sold at that moment. Because that marginal generator is almost always an expensive gas-fired power station, the cheaper electricity generated by domestic renewables and nuclear gets priced out of the equation. Even on days when wind generation is booming, Lancashire factories are still footing a bill indexed to global natural gas prices.

Successive governments have committed to decarbonisation, but rather than funding it out of general taxation, the bulk of the cost has been dumped straight onto industrial electricity bills. Between UK Emissions Trading Scheme (ETS) carbon costs, Contracts for Difference (CfD) top-ups, and legacy feed-in tariffs, non-commodity levies now make up a punishing proportion of every power invoice. It amounts to a tax on domestic production that our international rivals simply do not pay.

Our current exposure to volatile global markets was baked in years ago through poor strategic choices. The 2017 decision to shutter the Rough gas storage facility stripped Britain of its primary winter resilience reserve, leaving our energy market uniquely vulnerable to supply shocks. Pair that with the grinding delays and spiralling budgets at Hinkley Point C, and it is easy to see why clean, secure, affordable baseload power remains out of reach.

Waiting for Westminster to reform the Review of Electricity Market Arrangements (REMA) is not a business plan. If regional manufacturing is to protect its margins, leadership teams must take matters into their own hands.

That means looking beyond traditional broker renewals. Whether through behind-the-meter generation, commercial battery storage, structured corporate Power Purchase Agreements (PPAs), or intensive tariff auditing, the goal now is self-defence: removing as many kilowatt-hours from the national grid equation as possible.

The industrial heritage of Lancashire was built on making things better and more efficiently than anyone else. It’s time our energy strategy reflected that same pragmatic resolve.

Find out how to insulate your operations and cut your energy exposure at RMB&Co.