UK steel sector urges action on high power costs

The UK steel industry is urgently calling for action to address soaring electricity costs.

A recent report from UK Steel highlights that steelmakers in Britain are still grappling with electricity prices that are significantly higher than those faced by their European rivals, even with the government's recent efforts to lower industrial energy expenses.

According to the latest data on industrial electricity prices for 2025/26, UK producers are expected to pay as much as 25% more for electricity compared to their counterparts in France and Germany, which translates to an extra £26 million in costs each year.

As the industry invests heavily in electric arc furnace technology to move towards cleaner, electric-powered steelmaking, having competitive electricity prices is essential for the long-term sustainability and global competitiveness of the sector. Electricity is a key component in steel production, directly affecting production costs and investment choices.

Immediate reforms are needed

The report lays out a straightforward plan to bridge the electricity price gap and create a fair playing field for UK steelmakers:

• Implement two-way Contracts for Difference (CfDs) for wholesale electricity, which would align UK industrial power prices with those in France and Germany — a suggestion backed by the independent consultancy Baringa.
• Retroactively apply the 90% compensation uplift for network charges starting from April 2025, to avoid another year of excessive costs for British producers.

A call for competitive energy and long-term growth

Gareth Stace, the Director-General of UK Steel, expressed his appreciation for the Government's progress so far but emphasized that immediate action is still crucial for achieving real competitiveness:

• “The Government has made some positive moves to address the high industrial power prices. However, our report indicates that British steelmakers are still shelling out millions more for electricity compared to our European rivals.
• The UK steel industry is still at a disadvantage, grappling with electricity costs that can be up to 25% higher than those in France and Germany. These uncompetitive power prices pose a serious threat to jobs, investment, and our Net Zero goals.
• Our report outlines a clear solution: we need to implement a two-way CfD mechanism and quickly backdate network charge relief. These measures would finally level the playing field when it comes to industrial electricity prices.
• The potential is enormous. By securing competitive power prices, the UK can build a modern, low-carbon steel industry that will bolster clean energy, infrastructure, and manufacturing growth for years to come.”