British steelmakers are sounding the alarm over the widening gap in electricity prices with their European rivals, warning that the escalating war in the Middle East has pushed up Britain’s electricity costs to levels that threaten the industry’s survival and could derail the government’s flagship steel strategy.
In its response to the government’s publication today of the results of the consultation on the UK’s Industrial Competitiveness Scheme (BICS), trade body UK Steel has offered cautious praise, tempered with a stark warning: while the new system will provide significant relief to parts of the steel supply chain, it does nothing to tackle the crippling wholesale electricity costs that are weighing on steelmakers themselves.
The figures make sobering reading for anyone invested in the fortunes of British heavy industry. British steelmakers now pay up to 77% more for electricity than their counterparts in France and Germany, a huge gap that has widened from around 25% in just a few months. Indicative industrial prices for 2026 assume costs will be around £84 per megawatt hour in the UK, compared to around £48 in France and £65 in Germany.
The fallout is measured in the tens of millions. UK Steel expects that without intervention the industry will have to bear an additional £82 million in annual electricity costs compared to operations in France. This strain risks stalling decarbonization projects, shifting order books to continental competitors and undermining the credibility of the government’s steel strategy.
The BICS itself was generally welcomed for its offer. The program will significantly reduce electricity bills for parts of the steel supply chain and energy-intensive facilities that are not currently covered by the existing funding framework. For businesses that were previously ineligible for relief, this represents an important and long-overdue lifeline.
The crux of the matter is that steelmakers themselves already benefit from similar support from the British Industry Supercharger, so the key challenge of competitiveness remains unaffected. This challenge has been painfully mitigated by the war in the Middle East, which has driven up wholesale gas and electricity prices and once again exposed the UK’s structural dependence on gas-based electricity prices.
Frank Aaskov, director of energy and climate policy at UK Steel, said the program was a helpful step but would not address the fundamental problem.
“The BICS will provide welcome relief for parts of the steel supply chain and manufacturers not currently covered by existing schemes, significantly reducing their energy bills,” he said. “But it will not reduce electricity prices for steel producers themselves, who continue to face exceptionally high wholesale electricity costs.”
Aaskov added that the deterioration was rapid and severe. “This problem has become much worse in recent months. As a result of the Middle East war, British steelmakers are now paying almost 80% more for electricity than competitors in France and Germany, up from around 25% previously. This is despite support already in place and reflects the UK’s continued dependence on gas-driven electricity prices.”
The industry body is urging ministers to go further, advocating for a mechanism to realign wholesale prices along the lines of consultancy Baringa. Such a move, UK Steel argues, would bring UK industry’s electricity costs in line with continental competitors and restore the investment confidence the sector desperately needs.
“To make the steel strategy a success and achieve the government’s industrial and decarbonization ambitions, additional measures are now essential,” Aaskov said. “This requires targeted measures to align wholesale electricity prices with those of our European competitors, giving the industry the confidence to invest.”
There is a lot at stake for SME suppliers woven along the steel value chain, from specialist processors to downstream manufacturers. A weakened domestic steel industry would impact thousands of smaller companies whose order books depend on healthy demand from major producers. Westminster now faces the question of whether a partial solution is enough or whether bolder interventions in wholesale prices are the only credible way to keep British steel in the game.
